Sun, Aug 19, 2001 - Page 10 News List

Crude oil declines on expectations of ample US reserves


Crude oil fell for the fourth time this week on expectations that US inventories will be ample in the weeks ahead, as the peak-demand summer gasoline season draws to a close.

Inventories are up 7 percent from a year ago and even a possible disruption in the flow of oil from Nigeria, Africa's top producer, won't be enough to send supplies lower, traders said.

Prices fell 4 percent this week as refiners began to retool to make winter heating fuels.

"We certainly don't have a shortage of oil in the country," said Bill O'Grady, director of fundamental futures research at AG Edwards & Sons Inc in St. Louis. "Supplies are at about where they should be." Crude oil for September delivery fell US$0.72, or 2.6 percent, to US$26.68 a barrel on the New York Mercantile Exchange, the lowest closing price since July 31. Prices are down 4.9 percent this week and 16 percent from a year ago.

In London, Brent crude oil for October settlement fell US$0.90, or 3.5 percent, to US$24.73 a barrel on the International Petroleum Exchange.

Royal Dutch/Shell Group, Nigeria's largest foreign producer, said a fire and vandalism at a crude oil pipeline may halt more than 10 percent of the nation's oil production. Shell normally pumps about 750,000 barrels a day from oil fields in the Niger Delta.

There is the potential that more than 200,000 barrels a day might be cut off, said Justin Everard, a Shell spokesman. Still, ``there is no impact at all at present,'' he said.

The fire affected a facility belonging to the company's Nigerian unit in Ogoniland, where people had dug up sections of the pipeline to tap fuel or to sabotage operations, Everard said.

Nigeria normally pumps about 2 million barrels of oil a day.

The country was the sixth-biggest source of imports in the US in May. Refiners prize Nigerian grades such as Bonny Light because they produce a large proportion of gasoline.

Shell already has told customers it may miss deliveries from the Bonny terminal through the end of August because a fire in July reduced output.

"The oil companies don't scare easily -- they will stick to Nigeria even with all the problems there,'' O'Grady said.

Gasoline for September delivery fell US$0.35, or 4.5 percent, to US$0.7395 a gallon on the Nymex, the biggest decline since June 27. Gasoline futures, which represent wholesale prices, are down 7.5 percent this week and are 22 percent lower than at this time last year.

Heating oil for September delivery fell US$0.364, or 4.9 percent, to US$0.7051 a gallon, the biggest decline since Dec. 20. Prices have dropped 5.2 percent this week.

US refiners usually slow production this time of year to make repairs and to switch their emphasis from gasoline to heating oil.

Shell Deer Park Refining Co said a unit at its refinery in Deer Park, Texas, was shut for planned maintenance on Friday.

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