Light sweet crude kicked it up a notch when the U.S. Dept. of Energy (DOE) reported a drop in crude inventories for only the second time in last 3 months. Futures traded as high as $51.65 in New York on midday ticks. North Sea Brent crude was also trading up over a dollar at 50.15.
The DOE report marked a 1.6 million barrel drop to 332.4 million barrels after last week’s phenomenal increase of 4.3 million barrels. Despite these drops however, U.S. inventories for crude remain at their highest levels in 6 years. The real bone crusher is that oil traded below $47 last week as the June contact closed.
Gas reported up 600,000 barrels in U.S. inventories at 215.4 million barrels. Gasoline also traded up, having hit $1.47 at one point today also. These higher prices come right before the beginning of the summer driving season, which starts at quitting time on Friday evening. Heating oil ran up to $1.40 a gallon too.
The stock market took hits as a result as investors assumed that oil prices, which had been a bit lower for the last few weeks denoted a more stable U.S. market place. But, with the drop in the U.S. inventories, traders in oil as well as stocks all got spooked.
The real thorn in the side of the fuel industry remains refineries or the lack there of. The U.S. hasn’t built a new oil refinery since 1976 and several have gone off line since then. Currently, operating refineries continue to experience operational problems with regard to maintenance at various facilities around the country.
OPEC has discussed using their profits to construct new refineries and other measure to help insure stability of oil prices. In a recent interview with Al Aribiya, OPEC President Sheikh Ahmad al-Fahd al-Sabah said Iraq could be the difference if they could stabilize oil production.
Also, the new Azeri pipeline opened today, pumping oil from the Caspian Sea region creating a new route for oil traditionally pushed through Moscow for sale.
John Stith is a staff writer for Murdok covering technology and business.
