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  1. munch

    3,567 Posts.

    02/26 16:01
    Crude Oil Soars to 12-Year High on Plunging U.S. Fuel Supplies
    By Mark Shenk

    New York, Feb. 26 (Bloomberg) -- Crude oil futures surged to the highest price since Iraq occupied Kuwait in 1990, after the Energy Department reported declines in U.S. inventories of oil, distillates fuels and gasoline.

    Crude oil for April delivery rose $1.64, or 4.6 percent, to $37.70 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 16, 1990. Oil reached $37.93 during the session, a 12-year intraday high. Prices rose to $41.15 a barrel on Oct. 10, 1990, the highest since the contract was introduced in 1983.

    ``These prices are alarming,'' said Don Reep, crude-oil supply manager at San Antonio-based Tesoro Petroleum Corp., the fourth-largest independent U.S. refiner. ``Everyone is carrying low inventory but certainly at these levels you definitely don't want to be sitting on any more crude than you have to. It's an enormous cash drain.''

    Prices have jumped 43 percent over the past three months as a strike cut oil exports from Venezuela. Prices also rose as the U.S. threatened to attack Iraq, saying the oil exporter still hasn't rid itself of weapons of mass destruction as it promised to do in the 1991 cease fire that ended the Persian Gulf War.

    Venezuela and Iraq in November pumped about 7 percent of the world's oil.

    U.S. oil inventories fell 1 million barrels to 271.9 million barrels in the week ended Feb. 21, down 14 percent from a year earlier, the department said in a weekly report. Supplies of distillate fuels, which include heating oil and diesel, dropped below 100 million barrels for the first time since May 2000, and gasoline stockpiles declined for the fourth time in five weeks.

    ``The supply situation is dire,'' said Phil Flynn, a senior energy trader at Alaron Trading Corp. in Chicago. ``Crude-oil inventories are dangerously low. We are only one small problem away from the minimum amount needed to operate the nation's refineries. If refiners want to make more distillates and gasoline, they are going to have to pay up.''

    Lower Inventories

    Demand for heating oil will be robust in the days ahead because of cold weather, analysts said. Temperatures in the U.S. Northeast, the fuel's biggest market, will be below normal for at least 10 days, according to meteorologist Joel Burgio at Meteorlogix LLC in Lexington, Massachusetts.

    ``It looks like the incentives to make heating oil are so strong that refiners aren't making gasoline,'' said Michael Busby, manager of crude oil and refined products trading at Northville Industries Corp. in Melville, New York.

    In London, the April Brent crude-oil futures contract rose 75 cents, or 2.3 percent, to $33.07 a barrel on the International Petroleum Exchange.

    UN Resolution

    U.K. Prime Minister Tony Blair says he expects support at the United Nations for a resolution on Iraq that may lead to war, after the chief UN weapons inspector said Iraq may not want to cooperate on disarmament.

    Blair's support for confronting Iraq was rejected by more than one in four of his Labour Party colleagues in a vote in the House of Commons.

    The inspections chief, Hans Blix, said his teams may need ``a few more months'' to complete their work even if Iraq cooperates with the agency immediately, Germany's Die Zeit reported. ``At the moment, it's not even clear whether the Iraqis really want to cooperate,'' Blix told the newspaper.

    The U.S., U.K. and Spain this week delivered a draft UN Security Council resolution saying Iraq has lost its ``final opportunity'' to cooperate with weapons inspections. France, China and Russia, all permanent council members with veto power, oppose the resolution, saying they want to give UN inspectors more time.

    ``We oppose all new resolutions,'' French President Jacques Chirac told reporters after talks in Paris with Spanish Prime Minister Jose Maria Aznar. ``There's no reason to justify going beyond resolution 1441,'' which ordered the resumption of arms inspections in Iraq.

    Iraqi Oil Reserves

    Total Fina Elf SA, France's largest oil company, and OAO Lukoil, Russia's largest, have options on one-quarter of Iraq's proven oil reserves, Le Monde reported earlier this month, citing people close to Iraq's Ministry of Oil. The U.S. Energy Department says Iraq has 112 billion barrels of oil in the ground.

    Iraqi President Saddam Hussein told CBS News he would rather die than be exiled. ``We will die in this country and we will maintain our honor,'' Hussein said, according to a CBS transcript of an interview to be televised today.

    Venezuela, which pumped about 3 million barrels of oil a day before the strike began on Dec. 2, is now pumping about 2 million barrels a day, according to the government. The national work stoppage was aimed at forcing President Hugo Chavez to step down. The strike ended Feb. 1 for all workers except those in the oil industry.

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