NEW YORK -- Crude oil rose above $24 a barrel for the first time in 2 1/2 years yesterday on expectations that an annual increase in heating demand will come with U.S. supplies unusually low.
"It's like money in the bank," said Charlie Bell, a terminal coordinator for a joint venture of Shell Oil Co. and Texaco Inc. in Cushing, Okla. The nation's inventory of petroleum is not low enough to cause operational problems, "though it's a little uncomfortable," he said.
U.S. oil supplies were 311 million barrels the week ended Sept. 3, according to the American Petroleum Institute, down 6 percent from a year earlier and the lowest level in 20 months. An annual jump in world oil use next month will boost demand by almost 3 percent, the International Energy Agency said Friday.
Oil prices have doubled this year. Yesterday, crude oil for October delivery rose 66 cents, or 2.8 percent, to $24.21 a barrel on the New York Mercantile Exchange, the highest closing price since February 1997. Crude had topped $23 a barrel only Thursday.
In London, October Brent crude oil rose 4 cents to $23.48 a barrel on the International Petroleum Exchange. It was the highest price for Brent since January 1997.
"U.S. crude inventories are to the point where they become a serious physical concern," said Tim Evans, an analyst at Pegasus Econometric Group in New York. "And that's a trend that is unlikely to be reversed any time soon."
The October crude oil contract was in demand because of perceptions that a shortage could erupt if the Organization of the Petroleum Exporting Countries sticks to its plan to restrict production through next March. OPEC meets next week in Vienna, Austria, and its members thus far support the cuts and maintaining current output levels.
If refineries run short of oil, they will have to cut back production as they did in 1997, Evans said.
"Stocks have gotten down to the threshold, and there's an expectation that it's going to continue," he said. "Where's this going to stop? In another three weeks, we could be under 300 million barrels, and, psychologically, that will make a statement."
World oil demand will probably rise 2.1 million barrels a day, or 2.8 percent, from the third to the fourth quarter this year as the Northern Hemisphere enters the winter heating season, the Paris-based IEA said. U.S. inventories are at their lowest level since January 1998.
After OPEC raised output in January 1998, prices began to fall and the group embarked on a series of production cuts to reverse that trend. The cuts weren't sufficient to keep oil from falling to a 12-year low of $10.35 a barrel in December. An agreement in March to take still more oil off the market sparked this year's rally.
Heating oil for October delivery was up 0.17 cents to 62.20 cents a gallon on the Nymex yesterday. Gasoline for October delivery rose 0.36 cent to 69.68 cents a gallon.
Pub Date: 9/14/99