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Pullback in gasoline demand called a blip; crude rebounds

WASHINGTON -- Crude oil prices rose almost 3 percent yesterday on concerns that last month's sharp drop in gasoline demand would be temporary and that the supply of transportation and home-heating fuels would remain tight well into 2006.

Analysts are particularly worried about the pace of recovery for offshore oil and natural gas drilling -- and onshore oil refining -- in the aftermath of hurricanes Katrina and Rita.

Light sweet crude for November delivery climbed $1.73 to settle at $63.53 a barrel on the New York Mercantile Exchange, where unleaded gasoline futures rose 3.26 cents to settle at $1.8332 per gallon.

In London, Brent crude futures rose $1.30 to $60.08 per barrel on the International Petroleum Exchange.

The Paris-based International Energy Agency said yesterday it anticipated some moderation in the September decline in gasoline demand, which it blamed on retail price spikes and sporadic supply shortages that followed Katrina and Rita.

The energy watchdog said ''October should be less affected as logistical disruptions subside."

The IEA also highlighted the prolonged loss of oil production in the Gulf of Mexico, saying output in non-OPEC supplies in 2005 and 2006 would fall by 300,000 to 400,000 barrels per day.

The IEA report mirrored the thinking of some Wall Street analysts who have raised questions about recent Energy Department data showing a 2.6 percent decline in gasoline demand over the past month.

''We believe the recent demand pullback is mostly a short-run response to a price spike, not a long-run shift in consumption patterns," Merrill Lynch commodity analyst Francisco Blanch said in a report.

The Energy Department said yesterday that the average retail price of gasoline fell by 8 cents last week to $2.85 per gallon.

While refineries along the Gulf Coast are slowly returning to service, plants accounting for almost 3 million barrels per day of gasoline, heating oil, and jet fuel output -- about 18 percent of total US output -- remain shut or are operating at reduced rates.

The US Minerals Management Service said 70 percent of daily oil production and 60 percent of daily natural-gas production in the Gulf of Mexico was down.

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