Nov 21, 2007 4:30 pm US/Eastern
Oil Prices Flirt With $100 A Barrel
Energy futures balked on a drive to $100 a barrel Wednesday after the government reported that supplies at a key oil terminal in the Midwest rose for the first time in weeks.
Overall crude inventories fell, and distillates including heating oil dropped more than expected last week, the Energy Department's Energy Information Administration reported.
That could mean more bad news for heating oil customers already expecting costs to rise 22 percent this winter. Heating oil futures fell 0.32 cent to $2.6869 a gallon on the New York Mercantile Exchange after earlier hitting $2.7154, a new record.
George Vukasin watches the price of oil, minute to minute, bracing himself when it rises, reports CBS News correspondent John Blackstone.
Vukasin isn't in the oil business -- he's in the coffee business. But a tour of his roastery shows how energy prices percolate through the whole economy.
The cost of shipping sacks of coffee around the world depends on the price of oil. Energy costs hit everything from firing the roaster, to running forklifts and delivery trucks, adds Blackstone.
"The price of natural gas, the price of propane, the price of oil, the price of electricity -- all is going up," said Vukasin of Peerless Coffee and Tea.
At the pump, meanwhile, gas prices fell 0.1 cent overnight to a national average of $3.089 a gallon, according to AAA and the Oil Price Information Service. Prices have fallen 2.3 cents since last week, and are almost 14 cents below the record price of $3.227 a gallon set in May, a bit of good news for Thanksgiving holiday drivers.
Gas prices will likely remain flat or fall unless oil reaches $100 a barrel or higher, analysts say.
The price of oil has now increased 45 percent since August, reports CBS News correspondent Larry Miller.
Crude prices retreated Wednesday, however, after a mixed inventory report that didn't do much to change a prevailing view that oil supplies will tighten amid rising demand.
"It's two steps forward, then one back in terms of this week's inventory cushion," said Tim Evans, an analyst at Citigroup Inc. in New York.
Light, sweet crude for January delivery fell 90 cents to $97.13 a barrel on the New York Mercantile Exchange.
Before the inventory report, prices had risen as high as $99.29 a barrel in electronic trading to break the previous intraday record of $98.62 set earlier this month.
"Not exciting enough to get us over the hump just yet," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, referring to the inventory data.
Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.
Other energy futures were mixed. December gasoline fell 1.31 cents to $2.4384 a gallon on the Nymex. December natural gas rose 13.1 cents to $7.608 per 1,000 cubic feet. In a separate report, the EIA said natural gas inventories grew by 4 billion cubic feet last week, more than expected.
In London, December Brent crude fell 63 cents to $95.86 a barrel on the ICE Futures exchange.
Oil inventories fell by 1.1 million barrels last week, versus a 700,000 barrel increase analysts surveyed by Dow Jones Newswires, on average, had expected. Inventories at the closely watched Nymex delivery terminal in Cushing, Okla., rose by 1.2 million barrels, however. It was the first substantial increase in Cushing stocks in weeks, and the largest since the end of August.
The Cushing terminal is the physical delivery point for Nymex crude. Falling supplies there are seen as a symptom of a tight market. Those concerns ease when Cushing inventories rise.
The EIA also said refinery activity fell last week, countering expectations for a slight increase. Gasoline inventories grew less than expected, but distillate supplies fell by 2.4 million barrels, far more than expected.
The decline in overall crude supplies can be explained in part by imports, which fell by an average of 667,000 barrels a day, or about 6 percent, last week. Gasoline imports rose 11 percent.
Demand for gasoline remains tepid, a function of higher prices, analysts say. Demand for gasoline rose by 35,000 barrels last week, and by 0.3 percent over the last four weeks compared to the same period last year, the EIA said.
Analysts cautioned that trading in energy futures could be volatile Wednesday due to light volumes before Thanksgiving. The Nymex will be closed Thursday and will close early Friday.
"This is holiday trade, and some pension fund comes in with a sizable order ... and you're down half a buck," said Jim Ritterbusch, president of Ritterbusch & Associates, in Galena, Ill.
