Oil Prices Soar Past $104 a Barrel

Crude oil futures soared on Wednesday after a weekly petroleum inventory report showed a surprising draw in storage figures.

The April West Texas crude contract jumped $4.47 to $103.99 a barrel on the New York Mercantile Exchange, and earlier it reached $104.56. Reformulated gasoline was up 6 cents at $2.59 a gallon, and heating oil gained 14 cents to $2.93 a gallon. The near-term natural gas contract climbed 23 cents to $9.59 per million British thermal units.

Spurring the jump in prices was a new report by the Energy Information Administration saying that crude stores fell by 3.1 million barrels for the week ended Feb. 29. Analysts surveyed by Bloomberg had forecast a 2.4 million-barrel increase in crude stores.

Gasoline stores grew by 1.7 million barrels, three times the expected build, while distillate inventories fell by a steeper-than-anticipated 2.3 million barrels.

While the new inventory figures don't support the huge run-up in crude prices, the report did reveal some interesting data, says Jim Williams, energy economist at WTRG Economics. The draw in crude stores was partly caused by higher utilization rates at U.S. refineries, which consumed 1.5 million more barrels of oil than they did the previous week. This was due to some refineries coming back online after completing their spring maintenance projects.

Crude imports into the U.S. were also down by 500,000 barrels a day from the previous week. "While that sounds like a lot, it is actually only two tankers worth of crude oil," Williams said. "The cause of that could be as simple as a single storm slowing the tankers' crossings from the Persian Gulf."

Also boosting prices was an announcement by OPEC that it would keep oil production rates steady until its next meeting. While this was widely expected by energy analysts, some economists and institutions, including the Bush administration, were hoping that OPEC would increase output in order to lower the price of crude oil.

Hopes of that happening were unrealistic, according to Thomas Hartman, energy analyst at Altavest Worldwide Trading. "If you look at the balance sheet that shows where crude supplies sit, we are close to the 16-year average. From OPEC's perspective, the crude market is well supplied," he said.

Hartman said that the $104 to $105 level appears to be an upper technical level for crude oil. "Last Monday crude oil skirted $104 before pulling back." Any break above that point could mean that oil will continue to move higher.

However, as gloomy economic data persist and OPEC continues to keep its production levels steady, "it is hard to imagine oil prices staying this high much longer unless there are further large decreases in petroleum inventory numbers," Hartman said.

Meanwhile, energy stocks are broadly higher in the trading session. Shares of BP(BP Quote - Cramer on BP - Stock Picks) are up 2.3% at $65.59. Chevron(CVX Quote - Cramer on CVX - Stock Picks) advanced 2% to $88.44. ConocoPhillips(COP Quote - Cramer on COP - Stock Picks) jumped 2.2% to $83.26.