- The Washington Times - Wednesday, February 12, 2003

NEW YORK, Feb. 12 (UPI) — Crude oil prices on the New York Mercantile Exchange continued their steady climb Wednesday as the United States' stockpile of crude fell to its lowest point since 1975.

March crude closed 33 cents higher at $35.77 per barrel — the highest settlement price in more than two years — erasing a decline that occurred during the morning when closely watched weekly inventory reports registered an unexpected increase in the nation's gasoline supply.

The U.S. Energy Information Administration inventory report said gasoline supplies were 3 million barrels higher than the week earlier. However, it was not expected that the upward movement of prices at the pump would be reversed until refiners begin receiving more crude oil.

"Crude oil imports for the week ending Feb. 10 averaged 7.2 million barrels per day, the lowest weekly average since the week ending January 28, 2000," the EIA said. "As a result, crude oil inventories are now at their lowest level since October 1975."

"A key barometer to watch in coming weeks will be the level of crude oil imports, because crude supplies need to increase significantly in order to pop the balloon and have product prices fall back to levels which customers are more accustomed to paying," the agency said.

OPEC has increased its crude production to 27.1 million barrels per day. But the EIA said the new exports have yet to make their way into the U.S. refining stream.

At the same time, concerns about a U.S-led attack on Iraq has added a war premium to prices. There is also bullish sentiment among traders to stock up on crude before fighting breaks out in the Persian Gulf.

Imports to the United States were largely affected by the labor troubles in Venezuela that slashed oil exports by a country that is traditionally a major supplier to the Gulf Coast.

"Following the Venezuelan strikes, U.S. refiners were able to maintain their inputs into refineries by drawing upon their limited crude oil inventories," the EIA said. "By mid-January, with U.S. crude oil inventories approaching the … level of 270 million barrels, refiners cut back (crude) inputs significantly. As a result, with less going into refineries, (gasoline) output was reduced as well."

The result has been a surge in gasoline prices — even though demand is low. The EIA pegged the national average for unleaded at $1.607 per gallon, 8 cents over last week and 50 cents above the national average a year ago. In addition, heating oil retail prices were near three-year highs on the frigid East Coast.

The situation has prompted calls by consumer groups for the release of oil from the nation's Strategic Petroleum Reserve and concerns that retailers have been too quick on the draw to raise their prices to such lofty heights.

"While the continuing loss of oil exports from Venezuela and recent cold weather have affected fuel inventories, nothing fully justifies the dramatic increase in gasoline prices that we've seen in the last few weeks," said Dawn Duffy, a spokeswoman for AAA in Minneapolis.

"AAA strongly urges the gasoline industry to show more restraint in the pricing of their products and encourages consumers to shop aggressively for the best prices."

(Reported by Hil Anderson, UPI Chief Energy Correspondent)

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