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Crude ends sharply up on U.S. gasoline fears
  London, 11th Apr 2001

   World oil prices surged yesterday, ending sharply higher as investment funds took fright at the prospect of a summer gasoline shortage in the United States.
London Brent crude last traded $1.23 higher at $26.51 a barrel and U.S. light stood $1.17 stronger at $28.45 at the close.

Oil prices briefly shed some gains in late trade but remained on high ground after United Nations figures showed that Iraq's oil exports rose 471,000 barrels per day (bpd) to 2.29 million bpd in the week to April 6.

Iraq, bound by UN sanctions, also reached its highest four-week oil exports average since early November, with 2.24 million bpd through April 6. Dealers said they were anticipating a seventh straight week of declines in U.S. gasoline inventories when the American Petroleum Institute (API) issues U.S. fuel stocks data after the close of business yesterday.

They said investment funds which were short oil futures on the New York Mercantile Exchange now were buying back contracts, helping push prices higher. "U.S. gasoline is getting incredibly tight and the funds are short. They could easily push the market higher again," said a London futures dealer.

Latest data from the U.S. Commodity Futures Trading Commission, released last Friday, showed speculators with their largest NYMEX crude short positions - a bet that prices will fall - in three years.

"Gasoline provided the main support for the market yesterday with traders already positioning themselves for a bullish API report tonight," said Lawrence Eagles of GNI Research. Eagles said the report would need to show a three percent jump in refinery utilisation from a forecast one percent to allay fears of a gasoline supply crunch.

A Reuters survey of analysts forecast a 1.5 million barrel draw on gasoline stocks, already at the lowest end-March levels for at least 17 years. Analysts also were expecting a 2.3 million barrel build in crude stocks and a decline of 1.1 million barrels in middle distillates, including heating oil and diesel fuel.

Last week, the API pegged gasoline stocks 10 million barrels below levels at the same time last year, when inventories proved insufficient to meet summer consumption and U.S. pump prices surged to record highs at more than $2 a gallon.

U.S. gasoline futures touched $1.00 a gallon on Monday for the first time since October and last traded 3.38 cents stronger at $1.0250 a gallon yesterday. The U.S. Department of Energy has warned that retail gasoline prices are likely to jump this summer if the U.S. supply system experiences any disruptions or bottlenecks.

Average U.S. retail prices, at $1.50 per gallon, have already topped the expected summer average price of $1.49, the DOE said on Monday. The rise in U.S. prices has forced European gasoline cargo prices above $300 a tonne for the first time in six months. Prices reached $314 a tonne on Tuesday and could soon translate into further price increases at the pump.

High U.S. prices are making it profitable for sales of gasoline into the United States from Europe. Last year European fuel protests saw farmers and hauliers lead demonstrations aimed at lowering government taxes on diesel and petrol. Unlike the United States, Europe's oil inventories look comfortably placed.

European crude and petroleum product inventories rose 7.32 million barrels in March for a year-on-year surplus of 19.32 million, European Union agency Stichting Euroilstock said. In Singapore the Asian sweet crudes market was steady as indicated by an early premium trades for the June market, to the surprise of some traders yesterday.

A first half June lifting Malaysian Masa cargo traded at Tapis APPI +42 cents a barrel, versus last trades for May at around +45 cents, traders said. They said that they had expected market levels to ease as heavier flow of  West African crudes were due to hit the region from end May.

"It is stronger than expected because still some refiners need to take Malaysian crudes," one Japanese oil trader said. The market was however still embryonic. The Masa cargo was the only second trade reported for June so far. A part cargo of Malaysian Labuan was sold last week at Tapis +45 cents.

Traders said the market will get into its stride next week, when buyers will know their latest monthly crude allocation volumes from leading Middle East sellers Saudi Arabia, Iran and Kuwait. Australian light sweet crudes also held firm. Traders said a couple of June Cossack cargoes were offered at TAPIS +30-45 cents a barrel levels. Sellers pointed to the outage of Laminaria output as reason to believe that buyers may pay up.

Australia's Woodside Petroleum said yesterday that it has scheduled a 10-day maintenance shutdown of the Laminaria-Corallina oilfield in the Timor Sea in June. This will result in the loss of around 1.5 million barrels output or two and a bit standard export cargoes, a spokesman told Reuters. Indonesian medium sweet Minas was quiet as supplies were seen finished for May, traders said.

Two Western traders however did a forward deal for a July lifting small 150,000 barrels to 200,000 barrels at a strong premia of ICP +95 cents. This signalled that the market, which was last traded at around ICP +75 cents for May, was expected to firm going forward.

The Asian sour crudes market was quiet and tying up May business. A European major sold small 20,000 barrels top-up Abu Dhabi Murban crude at ADNOC +20 cents for May. A Qatar Marine cargo was also rumoured sold by a Japan trader, but details One or two cargoes of Banoco Arab Medium crudes remains, and was talked at Saudi formula -50 cents/-25 cents levels.

Source: Gulf News

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