- The Washington Times - Thursday, February 20, 2003

NEW YORK, Feb. 20 (UPI) — March crude settled 37 cents lower on its final day of trading on the New York Mercantile Exchange Thursday amid a key inventory report that determined the supply of oil on hand in the United States had increased slightly for the first time this year.

The Energy Information Administration reported a 3 million barrel build in crude inventories during the previous week that was due largely to a boost in imports of nearly 9 million barrels per day.

March settled at $36.79 per barrel Thursday as trading on the contract expired. April, which becomes the front month on NYMEX Friday, settled at $34.74 per barrel. March gasoline settled 3.6 cents lower at 96.58 cents per gallon while heating oil dropped 4 cents to a still-strong $1.058 per gallon.

Fundamentals in the market appeared to remain bullish overall due to the fact that the United States still appeared poised to invade Iraq sometime in the coming weeks while Venezuela continued to grapple with labor and political strife that has considerably hampered its petroleum exports.

Another closely watched inventory report issued Thursday by the American Petroleum Institute determined that crude supplies had fallen last week by some 3.3 million barrels.

In addition, the EIA said, U.S. refineries have been gobbling up the additional imports almost as quickly as the tankers can reach the dock.

"Although crude oil inputs to refineries did increase to 14.3 million barrels per day last week, this still wasn't high enough to produce enough (refined) products to keep these inventories from falling, especially while refined product demand is over 20 million barrels per day," the agency said Thursday.

The strain on supplies has gained greater importance due to the possibility of production and export disruptions in the Persian Gulf and because the beginning of the summer driving season is within sight.

The nationwide average price for a gallon of regular gasoline Thursday was $1.665 compared to $1.12 a year ago, according to AAA.

Gasoline prices have been climbing steadily at a time of year when they are generally lower, and Northwest and Continental Airlines followed the lead of other airlines and announced their own $10 ticket surcharges to cover the rising cost of jet fuel.

There was also a specific crude shortage in the Midwest that the EIA predicted could fuel higher NYMEX prices in the near future.

The geographic area known as PADD II, which includes the Midwest market, reported its lowest crude inventory — 50.3 million barrels — since records were first kept on PADDs (Petroleum Administration for Defense District) basis in 1989.

"This is important because PADD II includes Cushing, Oklahoma, where physical barrels are traded for West Texas Intermediate crude oil, the (NYMEX) benchmark crude oil," the EIA pointed out. "If inventories get particularly tight at Cushing, then upward pressure on prompt WTI prices could develop, which may lead to higher prompt prices for other crude oils in the United States."

(Reported by Hil Anderson, UPI Chief Energy Correspondent)

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