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Gasoline Shoots to 2 1/2-Year High on Tight Stocks

April 18, 1995

Gasoline futures prices shot to their highest level in more than 2 1/2 years Tuesday amid concerns about tight supplies heading into the summer driving season.

Oil refiners, unable to produce enough gasoline to meet their obligations, are buying fuel on the open market, analysts said.

Other energy futures also rose. On other commodity markets, silver vaulted higher on speculative buying. Soybeans weakened. The Commodity Research Bureau’s index of 21 commodities rose 0.82 point to 236.82.

Wholesale reformulated gasoline for May delivery gasoline soared 1.66 cents on the New York Mercantile Exchange to 63.69 cents a gallon, the highest daily settlement near-term deliveries since Aug. 31, 1992.

In other energy trading, May light sweet crude oil climbed 32 cents to $20.05 a barrel; May wholesale heating oil rose 0.18 cent to 50.19 cents a gallon; May wholesale natural gas rose 2.3 cents to $1.679 per 1,000 cubic feet.

Gasoline surged as traders speculated a weekly industry report would show continued decline in U.S. gasoline stocks.

The American Petroleum Industry report, which was released late in the afternoon, confirmed those expectations, showing a decline of 1.14 million barrels.

``We’re going into the peak driving demand season with very low inventories in the United States and Europe,″ said analyst John Saucer of Smith Barney Inc. in Houston.

U.S. crude stocks rose by 646,000 barrels last week, the API report showed. Stocks of distillates, primarily heating oil, fell 2.12 million barrels.

U.S. gasoline stocks at the end of the first quarter were nearly even with levels a year earlier, but 2.5 percent below the 3-year average. Year-ago stocks were low because cold weather forced refiners to produce more heating oil and less gasoline than usual.

This year’s first-quarter weather was warmer than normal, which encouraged driving and gasoline consumption. Now, as the peak driving season begins, some refiners are strapped.

``We’ve seen a lot of refiners, a lot of major oil companies, scouring about, buying prompt barrels in the open market, paying big money for them,″ Saucer said.

European gasoline stocks at the end of March were down about 6.5 percent from a year earlier, he said, reflecting improvement in European economies

Energy futures also were bolstered by news that Iraq’s Parliament approved President Saddam Hussein’s rejection of a U.N. Security Council offer that would have allowed Iraq to sell up to $2 billion worth of oil over 180 days to buy food and medicine.

Iraq has demanded a complete lifting of all sanctions imposed by the United Nations after its August 1990 invasion of Kuwait.

May silver futures leaped 14 cents to $5.865 on the New York Mercantile Exchange, extending Monday’s 34.3-cent gain.

Analyst Dave Rinehimer of Smith Barney Inc., noted strong investor buying.

``To what extent it reflects inflation uncertainties or just increased speculative demand for silver, it’s hard to determine at this point,″ he said.

Talk of attempted market manipulation continued to circulate in the trading pit. Rinehimer was skeptical of a supply squeeze, citing more than 200 million ounces of silver registered with the exchange.

``I don’t view that as a particularly tight supply situation,″ he said.

April gold rose $1.30 to $395.40 a troy ounce.

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