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OIL FUTURES: Nymex Crude Ends At $55; SPR To Be Expanded January 23, 2007

Posted by notapundit in Economic News.

NEW YORK (Dow Jones)–Crude oil futures rallied more than $2 a barrel and topped $55 on Tuesday after the U.S. unveiled plans to expand its Strategic Petroleum Reserve and start purchasing small amounts of crude oil toward filling it.

U.S. Energy Secretary Samuel Bodman said the U.S. Department of Energy is planning to begin purchasing as much as 100,000 barrels a day of crude oil this spring, as the U.S. moves to double the SPR’s capacity to 1.5 billion barrels by 2027. President George W. Bush will outline the plan in his State of Union address Tuesday night.

The addition of 100,000 barrels a day of oil into the SPR represents less than 0.5% of total daily U.S. oil consumption. Nevertheless, the prospect of increased oil demand was enough to gave prices a late boost.

“This is going to give the market a little bit of extra support,” said Peter Beutel, president of trading advisory and consultancy Cameron Hanover in New Canaan, Conn. “It does not look like the numbers involved will be enough to roil the market, but it does look like it will give us an extra increment of buying and demand had been missing… since the (2005) hurricanes.”

The March crude contract on the New York Mercantile Exchange jumped $2.46 to $55.04 a barrel, the highest settlement price since Jan. 9.

The March Brent contract on ICE Futures rallied $2.40 to $55.10 a barrel.

February heating oil rose 6.79 cents to $1.5763 a gallon. February RBOB gasoline gained 7.19 cents to $1.4473 a gallon.

Crude prices have risen nearly 10% since dropping to a 20-month low of $49.90 a barrel last week. The recovery has been fueled largely by the arrival of cold weather in the Northeast, which accounts for 80% of U.S. heating oil demand.

“This market had been overdone on the downside and was overdue for a rally,” said Mike Cambria, vice president of PNDR Energy Group in New York.

OPEC President Mohammed al-Hamli said he’d been worried by the recent price slide but that prices were likely to firm up rather than collapse in the near term.

The cartel would be comfortable with the price of its benchmark basket of crude at $55.00 a barrel, compared with the average of less than $50.00 a barrel on Monday, he said.

“We don’t like very high prices and we don’t like very low prices,” al-Hamli said in an interview with Dow Jones Newswires.

In announcing plans to boost the SPR, Bodman said care will be taken to avoid adversely impacting the market or raising the price of gasoline.

The SPR holds roughly 691 million barrels of crude oil, an amount that represents 55 days of net oil imports, according to the White House. By contrast, the reserve held the equivalent of 118 days of imports in 1985 when the country imported a lot less crude oil.

Congress last year authorized the Bush administration to raise the SPR’s capacity to 1 billion barrels. Bush will ask Congress to add an additional 500 million barrels of capacity.

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents a gallon and the changes are in points; prices for ICE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:
Contract Settle Change Vs Low High
Mar crude oil 55.04 +246 52.41 55.15
Apr crude oil 55.91 +238 53.36 55.97
Feb heating oil 157.63 +679 150.25 158.30
Mar heating oil 159.25 +680 151.75 159.50
Feb RBOB 144.73 +719 137.55 145.00
Mar RBOB 148.19 +677 141.97 148.38

ICE Prices:
Contract Settle Change Vs Low High
Mar ICE Brent 55.10 +240 52.59 55.18
Apr ICE Brent 55.68 +218 53.50 55.78
Feb gasoil 485.00 -550 477.25 488.25
Mar gasoil 488.50 -600 481.00 491.75

By Masood Farivar, Dow Jones Newswires


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