Bloomberg: Oil Falls From Near 10-Month High as Gains Seen as Unjustified

Extract: In Nigeria, Royal Dutch Shell Plc’s oil rig was attacked and five expatriates were taken hostage, Precious Okolobo, a spokesman for Shell’s Nigerian venture, said today. The attack occurred in the Soku field, where the rig was drilling a well. No production was affected, he said.

By Eduard Gismatullin
 
Traders work in the crude oil futures pit in New York July 4 (Bloomberg) — Crude oil fell in New York from near a 10-month high as some traders speculated five days of gains weren’t justified.

Oil rose 5.4 percent in the past five trading days, partly on concern refinery breakdowns will slow U.S. gasoline output. Flint Hills Resources LP, a unit of Koch Industries Inc., and Valero Energy Corp. reported faults at plants in Texas.

“This is possibly a correction after recent gains,” said Stanislav Nazarati, a trader at Letofin AS in Estonia. “The general market sentiment is bullish” on product supplies.

Crude oil for August delivery fell as much as 52 cents, or 0.7 percent, to $70.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $71.16 at 12:16 p.m. in London. Open outcry trading will be closed at Nymex today because of the Fourth of July holiday in the U.S.

“Trading is likely to remain quiet” today, Barclays Capital analysts Kevin Norrish and Sudakshina Unnikrishnan wrote in a report. “U.S. refinery runs are currently very low — some 700,000 barrels per day below last year’s level.”

U.S. refineries probably operated at 90.2 percent of capacity last week, according to a Bloomberg survey of analysts before a government report this week. That’s below the 93.1 percent that units operated last year.

The U.S. Department of Energy will publish its refinery utilization and oil supply report tomorrow, a day later than usual, because of the holiday.

Brent oil for August settlement fell as much as 50 cents, or 0.7 percent, to $72.43 a barrel on the ICE Futures exchange. It traded at $72.66 at 12:15 p.m. in London.

Faults Reported

Flint Hills shut a hydro-cracking unit at its 300,000 barrel-a-day refinery in Corpus Christi, Texas, on July 2 because of a leak on an air fin exchanger, according to a report on a state Web site. The company hasn’t said whether the unit had been returned to service.

Valero Energy reported flaring of chemicals at its 340,000 barrel-a-day Corpus Christi refinery the same day. Coffeyville Resources LLC’s plant in Coffeyville, Kansas, was shut indefinitely on July 2 because of flooding.

Gasoline demand in the U.S., the world’s biggest oil user, usually peaks June through August as summer holiday travel puts more cars on the road.

The Energy Department report will probably show U.S. stockpiles of the fuel rose 500,000 barrels in the week to June 29, based on the median estimate from a Bloomberg News survey of 15 analysts. Stockpiles held 202.6 million barrels on June 22, 4.4 percent less than the five-year average for the period.

Inventory Decline

Crude-oil inventories probably declined by 200,000 barrels as refiners increased gasoline production, according to the survey. Stockpiles held 350.9 million barrels the prior week, a nine-year high and 11 percent more than the five-year average.

In U.S. dollars, West Texas Intermediate, the New York- traded crude benchmark, has fallen about 5 percent in the past 12 months. Oil has dropped 12 percent in euros, 14 percent in British pounds and was little changed in yen.

“You have increased demand and we are moving into the hurricane season, and there is the summer driving season in the northern hemisphere,” said Peter McGuire, managing director of Commodity Warrants Australia in Sydney. “That could spike prices a little bit higher, but we are thinking it should consolidate within this range.”

OPEC Call

The Organization of Petroleum Exporting Countries, the producer of about 40 percent of the world’s oil, last year agreed to cut crude supplies by 1.7 million barrels a day to maintain prices around $60 a barrel.

OPEC’s basket price, a weighted average of 11 blends produced by the member nations, rose 91 cents to $69.55 a barrel yesterday, an 11-month high.

“Our forecast is that we believe that OPEC could raise production, but OPEC runs its own race,” McGuire said.

In Nigeria, Royal Dutch Shell Plc’s oil rig was attacked and five expatriates were taken hostage, Precious Okolobo, a spokesman for Shell’s Nigerian venture, said today. The attack occurred in the Soku field, where the rig was drilling a well. No production was affected, he said.

At the same time, Paolo Scaroni, chief executive officer of Eni SpA, that has oil projects in Nigeria, said force majeure at the company’s Nigerian Ogbainbiri flow station is still in place. Eni declared the clause on June 19 after the facility was attacked by gunmen two days earlier.

To contact the reporter on this story: Eduard Gismatullin in London at [email protected]

Last Updated: July 4, 2007 07:46 EDT