Energy shares drew little comfort Feb. 4 from rising oil prices lifted first by red hot heating oil, then gasoline soaring to nine-year highs. U.S. light crude for March delivery settled 79 cents higher at $28.82 a barrel on the New York Mercantile Exchange, about $1 away from post Gulf War highs reached in late January.
Prompt heat oil barges delivered to the New York Harbor soared to a $1.00 premium to the futures, which closed up 0.88 cent at 78.78 cents gallon. This put the cash wholesale price for a gallon of the fuel over $1.73, their highest ever level.
Gasoline futures shot up to a fresh nine-year high of 80.15 cents a gallon amid fears that current tight supplies may even get tighter as the summer driving season looms.
But equities investors were generally said to be avoiding energy shares from Big Oil to independent refiners, sending sectoral energy indices closing lower for a second day. "The fundamentals are improving and oil prices are up, yet the shares are down," said Van Levy of CIBC Oppenheimer & Co. who covers the oil and gas independents. "People are just not buying these shares. Investors are saying oil prices are way too high, and will wait until they go down to buy these shares," Levy added.
Analsyts say investors expect the Organization of Petroleum Exporting Countries (OPEC) will at one point ease supply cuts which sent oil nearly tripling from record low prices a year ago.
The S&P Oil and Gas Index - which tracks the small caps - fell 1.13 percent to 50.45 points while the Philadelphia Oil Services Index dipped 1.98 percent to 85.23. But the S&P International Oil Index took the hardest fall, 2.86 percent to 912.41 in comparison with the marginal 0.04 percent decline in the wider S&P 500 Index to 1,424.37. Among the majors, Exxon Mobil (XOM)
, the largest public oil firm, fell 1-9/16 to 80-11/16, No. 2 Chevron (CVX)
fell 2-14/16 to 78-9/16, Texaco 1 to 50-1/2, Conoco 1-5/16 to 21-7/16 while Phillips ended 3/8 lower at 39.
Atlantic Richfield and BP Amoco continued to retreat after U.S. antitrust regulators rejected their $27 billion merger proposal this week saying it may hike oil prices. Analysts fear the ensuing court battle may be lengthy. Arco closed 1-3/8 lower at 68-3/8 while BP Amoco's American depository receipts fell 2-14/16 to 49-5/16.
The heat oil spike in the U.S. Northeast started early January on a combination of cold weather, low supplies and refinery problems. The latest boost came from news barge deliveries from Northeastern refineries were delayed due to high winds and low tides in the Long Island Sound waterway.
U.S. stocks of distillates like heating oil stand at 112 million barrels, 38 million barrels below year ago levels and similar to levels of early 1997. U.S. crude stockpiles, at 218 million barrels, are the lowest level in 23 years.
"We're in a Catch-22 situation here," said Al Anton of Carl H Pforzheimer & Co. "If the oil price gets too strong and inventories get drawn down too much, then OPEC will have to raise production. So the more oil goes up it is in danger of being set into motion to go down," he said. "If OPEC remains at 85 percent or so compliance to the cuts then inventories by the end of the year will be down below working levels, which is an impossible situation and they would have to open the taps," Anton added.
Venezuelan oil minister Ali Rodriguez said OPEC doesn't want to disturb markets with its supply curbs, moving crude a few points higher. He insisted OPEC had still made no decision as to whether it will agree to raise output, as consumer nations have asked. - (Reuters)