- The Washington Times - Wednesday, February 26, 2003

NEW YORK, Feb. 26 (UPI) — Another reported decline in U.S. oil inventories Wednesday caused the price of crude to shoot to a post-Gulf War high on the New York Mercantile Exchange.

April crude soared $1.64 to $37.70 per barrel, the highest settlement NYMEX price since 1990, after the U.S. Energy Information Administration reported a decline of 1 million barrels in crude inventories during the past week.

"Despite market expectations of rising U.S. crude oil imports … imports actually dropped 400,000 barrels per day," the EIA reported. "As a result, crude oil inventories were drawn down by 1 million barrels in order to have refinery inputs average nearly 14.5 million barrels. At current demand levels, it was insufficient to keep petroleum product inventories from falling further."

Prices nearly broke through the $38 barrier earlier in the NYMEX session as buyers were caught off guard by the EIA report and scrambled to find sellers who could cover their needs in the futures market.

The EIA said imports that have recently been around 8 million barrels per day would have to pick up significantly in order for the United States to increase its crude inventory while at the same time producing enough gasoline and distillate fuel to satisfy current demand.

"Without a sustained period in which U.S. crude oil imports average 9 million barrels per day or more, we will likely continue to see low inventory levels across the board," said the EIA.

Along with a decline in crude supplies, the EIA also reported draws on supplies of gasoline and heating oil. March heating oil gained 3.23 cents on NYMEX to settle at $1.155 per gallon while March gasoline climbed 1.05 cents to $1.018 per gallon.

The recent bull market has been fueled by the combination of the nagging low fuel inventories and the tensions between the United States and Iraq. Saddam Hussein on Wednesday urged Iraqis to begin digging slit trenches for protection from U.S. bombs.

The low inventories have also been getting most of the blame for the unusual winter bull market that has pushed the pump price of gasoline to nearly $1.66 per gallon.

(Reported by Hil Anderson, UPI Chief Energy Correspondent)

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