Oil around same level as refineries step up output

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Tuesday May 24, 08:45

Oil around same level as refineries step up output

(by Elena Podshuvejt)

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Oil around same level as refineries step up output

Oil price has remained relatively stable on a rise in US refining output that was projected to increase to 94.5% of their capacity this week up from 94% in the past week, according to Bloomberg survey of economists.

July crude oil futures rose $0.14 to $49.30 a barrel.

’’Gasoline demand has been very strong and there’s no sign that high prices are impacting consumption,’’ said Bruce Evers, an analyst at Investec Securities in London. ’’With refineries running flat out, there’s more chance of a disruption to gasoline supplies.’’

Global refining capacity has been a bottleneck in the oil production chain as companies have proved to be more willing to invest in oil exploration and drilling than in refining industry that until recently has been a far less profitable business. Now the refining margin, the spread between the price of a barrel of crude oil and that of a distillate product, has widened due to tightening refining capacity. The US refining mammoth Valero Energy Corp. is going to post best second quarter in its history.

Refining capacity is expected to grow almost half of growth in demand growth that is expected to add 2 million barrels per day to last year’s level of 82.5 barrels per day. Lack of refining capacity is going to boost prices over the long run, stepping up demand for light crude that is easier to process by modern refineries than heavy varieties. Besides, refineries experience pressure from newest environmental laws that are putting in new requirements towards emissions.

Markets are awaiting the report of the U.S. Energy Department tomorrow at 10:30 a.m. Washington time.

OPEC President Sheikh Ahmad Fahd al-Sabah said on May 20 that the cartel will maintain output at the current level of 30.3 million barrels a day even in the face of a drop in prices.

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Read the related news and articles:
27 May 2005 08:09 AM	Oil above $51, gains trimmed by dollar rise
26 May 2005 07:13 AM	Oil shoots up on weak US inventory report
25 May 2005 09:28 AM	Oil around two-week peak on shutdown of Texas refinery
23 May 2005 10:40 AM	Oil prices down on rising US inventories and French refineries resuming production
20 May 2005 09:21 AM	Oil up as OPEC contemplates drop in output

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