Summer Driving Season Begins, Oil Above $51
The summer driving season is now beginning here with Memorial Day weekend, and oil prices are holding above $51 a barrel with traders feeling that this is a risky time for trade.
On Wednesday, oil prices jumped based on an unexpected drop in U.S. crude stocks. This is a sensitive time period for traders especially if inventories are low.
“The Memorial Day weekend is fairly significant in the oil market,” said Daniel Hynes, an energy analyst with ANZ Bank. “Certainly, industry participants will be watching the demand of this period very closely.”
In electronic trading on the New York Mercantile Exchange, light, sweet crude for July gained 32 cents reaching $51.33 a barrel. Heating oil prices dropped about half a penny to $1.4445 a gallon. Unleaded gas was slightly up at $1.4490 a gallon, and Brent crude futures for July delivery rose 28 cents to $50.44 a barrel. Bloomberg News reports:
U.S. crude stockpiles fell from a six year-high the week ended May 20, losing 1.6 million barrels to 332.4 million, the Energy Department reported two days ago. It was the first decline in five weeks. Supplies are still 7.8 percent higher than their five-year seasonal average.
“We shouldn’t put too much emphasis or become obsessed with what happened in one week,” Statoil’s Kartevold said from Stavanger, Norway. “We need to see a trend over at least two weeks. We were waiting for refiners to come back from maintenance, so I wouldn’t say the drop in crude inventories is very surprising.”
“What’s important is the driving behavior of Americans and what high prices and personal incomes will do to consumption,” said Statoil ASA analyst Tor Kartevold. “While the supply situation in the short term is comfortable, there are still expectations of a tight fourth quarter. Gasoline use will affect perceptions.”
The Organization of Petroleum Exporting Countries (OPEC) is scheduled to have a meeting in the middle of June, and is expected to keep its output levels about the same.