Crude oil was little changed staying close to a two-week peak on the closure of the refinery unit plant in Texas by Exxon Mobil Corp.
July oil futures rose $0.13 to $49.80 a barrel.
The shutdown of the refining facility at the time when the US is in the middle of driving season that usually leads to a surge in demand after the Memorial Day in May aggravates worries about tightening refining capacity.
``When you see Exxon and refinery shutdown in a headline, you’ll always have a reaction, especially when the industry is running close to maximum capacity,’’ said Daniel Hynes, a resources analyst at Australia & New Zealand Banking Group in Melbourne. ``Eyes will be on it to see if this does develop into something more significant.’’
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 today at 10:30 a.m. Washington time. Analysts expect buildups both in crude stockpiles and in gasoline inventories as US refineries picked up their pace in the past week.
GDP growth data for the US first quarter are awaited on May 26 and are expected to show a rise to 3.7% as compared to the previous estimate of 3.1%. Optimistic US growth numbers would boost demand for oil.
Today a new pipeline has been opened that will take Caspian oil to Turkey bypassing the once regional monopolist in exports of the region’s oil resources Russia. The 1,100-mile US-backed pipeline that will connect the Azeri capital with the Turkish Mediterranean port of Ceyhan was inaugurated in the presence of Azeri, Georgian, Turkish and Kazakh leaders.