The Shadow
NEW YORK (AP) – Gasoline futures jumped nearly 2 percent Wednesday after the government reported a surprise drop in the nation’s supply.
This could eventually tug pump prices higher, but so far that hasn’t happened. Retail gas prices have tumbled for three straight weeks.
The Energy Information Administration reported that gasoline stockpiles fell by 1.3 million barrels last week. Supplies sank as U.S. refineries continued to churn out less fuel.
The EIA report said refineries are operating at the lowest level on record, other than a few weeks in 2008 and 2005 when hurricanes ripped through the Gulf of Mexico and forced many to shut down. The slowdown in American refining comes as higher oil prices squeeze profit margins even tighter. Refineries like Valero Energy Corp. say they simply cannot pass along the higher crude costs to motorists.
Meanwhile, crude prices continued to rise Wednesday even though oil supplies grew last week. American petroleum consumption has been falling since 2007, and the government report said the country has been using less every week for the past month.
Benchmark oil for March delivery added 22 cents at $77.45 a barrel on the New York Mercantile Exchange. In London, Brent crude increased 59 cents at $76.65 on the ICE futures exchange.
Analysts said oil prices are rising mostly because of expectations of increased global demand. During the past several months, investors have bet that China and other developing countries will need more fuel this year, helping to push oil prices to a 15-month high in January.
In addition, “if refineries quit making gasoline, eventually that will cut into supplies,” PFGBest analyst Phil Flynn said. “If you have the perception that the economy will improve this year, maybe that’s a reason to be bullish about oil.”
Retail gas gave up another half-cent overnight to a new national average of $2.656 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded now costs about as much as it did a month ago, but it’s 76.6 cents more expensive than the same time last year.
In other Nymex trading in March contracts, heating oil rose less than a penny to $2.0361 a gallon, and gasoline gained 3.74 cents at $2.0553 a gallon. Natural gas gained 2.2 cents to $5.476 per 1,000 cubic feet.
