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Oil jumps 14 percent, products up
2008-12-31
NEW YORK - U.S. crude oil rose 14 percent on the final trading day of 2008 in thin pre-holiday trade on Wednesday, tracking a jump in gasoline as a slowdown in domestic refinery activity sparked fears of tightening fuel supply this winter. U.S. crude oil futures for February settled up $5.57 to $44.60 per barrel, but down 54 percent from the $95.98 on the last day in 2007. London Brent settled up $5.44 at $45.59. This year saw the record high prices in July above $147 a barrel crash to the year low of $32.40 on December 19 as the global recession dissolved world demand. Weekly U.S. inventory data on Wednesday showed a decline in refinery activity and a 500,000 barrel rise in crude stocks, compared with forecasts for a 1.5 million barrel decrease. "There's a sign that the industry might be cutting back on production rates to try to boost margins. As heating oil and gasoline prices are rallying, crude is tagging along," said Gene McGillian, analyst at Tradition Energy Stamford, Connecticut. "The market is trading in pretty thin volume ahead of tomorrow's holiday and I think that's contributing to some of the strength," he added. Inventories of refined products also rose, though less than analysts had expected. Gasoline stockpiles increased by 800,000 barrels, less than forecasts for a 1.5 million barrel build, while distillates rose by 700,000 barrels, below expectations for a 1.1 million barrel increase. Demand for both gasoline and distillates, which include heating oil, was lower than the same time a year ago, extending the trend for reduced consumption. Markets also were watching a dispute over gas supplies between Russia and Ukraine, which may have to buy distillates from Europe if gas supplies from Russia are halted. Russia's gas export monopoly Gazprom said on Wednesday that talks with Ukraine over gas prices for 2009 have failed, making a cut-off of gas to Ukraine on January1 unavoidable. "Thrown in with everything else, the Russian threat of a gas cutoff has everyone a bit nervous ahead of the close," said Tom Knight, trader with Truman Arnold in Texarkana, Texas. Analysts forecast an average of $49 a barrel for U.S. crude in the first quarter, and an average of $58.48 for next year, down $14 from their previous forecasts, the latest Reuters poll showed. Faced with slumping demand and prices, the Organization of the Petroleum Exporting Countries (OPEC) this month said it was cutting output 2.2 million barrels per day (bpd), its deepest reduction ever. Evidence is mounting that OPEC is complying with its goal to reduce production, led by top exporter Saudi Arabia. Market sources said on Tuesday the kingdom's supplies to long-term buyers in February could imply production of even less than its new OPEC production target. (Additional reporting by Timothy Gardner and Robert Gibbons in New York, Christopher Johnson in London and Chua Baizhen in Singapore; editing by Anthony Barker)
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