Oil Is Steady Amid Speculation Refinery Demand Will Increase

Crude oil in New York was little changed amid signs that U.S. refineries will increase operating rates as they try to replenish gasoline stockpiles.

Refineries operated at 89.5 percent of capacity last week the third straight weekly gain, according to the Energy Department. The profit margin for turning oil into fuels rose to the highest since at least 1989 yesterday, based on closing futures prices. Valero Energy Corp., ConocoPhillips and Murphy Oil Corp. have shut units for repairs this week.

``Everything is still extremely bullish but a bit of a correction is in order,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``You can have as many government investigations as you want but the fact remains that refineries are shutting units because of fires and other problems and we have hurricane season ahead.''

Crude oil for June delivery rose 8 cents to settle at $64.94 a barrel at 3:05 p.m. on the New York Mercantile Exchange. Prices touched $65.64 a barrel, the highest since May 1. Oil rose 4.1 percent this week and is 6.5 percent lower than a year ago.

Gasoline for June delivery in New York declined 2.89 cents, or 1.2 percent, to close at $2.4077 a gallon. Futures touched $2.44 a gallon yesterday, the highest since April 30.

``We're just taking a little break here,'' said Tim Evans, an energy analyst with Citigroup Global Markets Inc. in New York. ``Prices may resume their upward move when we come back next week.''

U.S. gasoline consumption peaks during the driving season, which lasts from the Memorial Day holiday in late May to Labor Day in early September.

Congressional Hearings

Committees in both the U.S. House of Representatives and Senate have held hearings on rising gasoline prices. A Senate panel approved legislation on May 8 that would make gasoline price gouging a federal crime.

Regular gasoline at the pump, averaged nationwide, rose 1.5 cent to a record $3.129 a gallon yesterday, according to AAA, the nation's largest motorist organization. Gasoline prices are up 7.1 percent from a year ago.

BP Plc will idle the primary fluid catalytic cracking unit at its Texas City, Texas refinery for 10 days of maintenance starting tomorrow, according to a person knowledgeable about the plant. The facility has three crackers, which make gasoline components. It's capable of processing 460,000 barrels of oil per day and is the third-largest U.S. refinery.

Nigerian Production

Royal Dutch Shell Plc's Nigerian venture resumed some production at an oil-gathering center after gaining access to the facility yesterday, a spokeswoman said. The Bomu manifold, a gathering point for crude oil flowing to the Bonny export terminal, was shut on May 10 by a protest that lasted several days. The terminal normally handles 170,000 barrels a day.

Bonny's exports for May and June remain under force majeure, a legal clause meaning deliveries are suspended because of conditions beyond the company's control, Shell spokeswoman Eurwen Thomas in London said.

Nigeria is losing more than 800,000 barrels a day of production because of violence, kidnappings and damage to oil facilities. About half of that has been shut for more than a year in the western Niger delta region, where a force majeure remains in place on exports from Shell's Forcados terminal and EA field.

Brent crude oil for July settlement fell 85 cents, or 1.2 percent, to close at $69.42 a barrel on the London-based ICE Futures exchange. Futures topped $70 yesterday for the first time since September.

Changes to Nigerian supply have a greater effect on North Sea prices, since the country's oil is priced in relation to Brent.

Crude oil may rise next week as refiners increase gasoline production, according to a Bloomberg News survey. Twenty of 40 analysts surveyed, or 50 percent, said oil prices will rise. Thirteen, or 33 percent, said prices will decline and seven forecast little change.
Source : http://www.bloomberg.com