Oil, Gasoline Snap Two-Day Slump

A BP refinery blast in Texas boosts energy futures, with gasoline hitting a new record high.
By Elinor Arbel ,

Updated from 11:58 a.m. EST

Oil prices staged a big rebound Thursday after a 6% decline in the past two sessions, with gasoline prices setting a new record high in the history of Nymex trading. The jump in unleaded gas was partly fueled by Wednesday's explosion at

BP's

(BP) - Get Report

largest fuel refinery.

The May crude futures contract closed up $1.03 to $54.84 in Nymex floor trading.

Both the benchmark U.S crude and gasoline prices rose in the wake of yesterday's explosion at a BP oil refinery outside Houston, which killed 15 people and injured 100 others. The plant is the third-largest oil refinery in the U.S., processing about 470,000 barrels of crude a day, but the overall impact on production is unknown. BP rose 3 cents, or 0.05%, to $62.04.

The market is looking at a "very real" drop in gasoline production as possibilities for a significant crunch become very apparent, said Peter Zeihan, senior energy analyst at Stratfor, in Austin, Texas. Global demand is much too high today with China's hunger for oil imports and Venezuelan President Hugo Chavez' threat to cut off its supply to the U.S., Zeihan said. "With 10% to 15% of the U.S. gasoline supply coming from Venezuela, the BP blast curbing domestic production, and OPEC pumping at full capacity, we are looking at an immanent shortage in supply," said Zeihan.

Gasoline futures added almost 2 cents to $1.597 a gallon, surpassing the record close of $1.595 set Monday, raising concerns among industry players about the ability of U.S. refineries to produce enough gasoline ahead of the so-called driving season, between June and September. Heating oil was up at $1.545 a gallon.

"This is one of the biggest refineries in the world, which means it will definitely affect gasoline prices at the pumps for the short term," said George Kleinman, CEO at Commodity Research Corp.

Bearish U.S. inventory data and the dollar's continued bout of sudden strength yesterday knocked $2.22 off the price of a barrel. Prices fell more than a dollar Tuesday.

Oil touched record highs -- both on an intraday and settlement basis -- last week, surpassing levels in the $55-a-barrel range set last October. Prices traded at around $35 to $37 a barrel at this time last year. OPEC has been trying to talk down prices by keeping traders focused on the possibility of a second production increase hot on the heels of the 500,000-barrel-a-day one agreed at a meeting last week in Iran.

Shares of major oil producers were mixed.

ExxonMobil

(XOM) - Get Report

lost 52 cents, or 0.87%, to $59.57;

ChevronTexaco

(CHX)

rose 32 cents, or 0.55%, to $58.74;

Royal Dutch/Shell

(RD)

dropped 6 cents, or 0.10%, to $59.96; and

ConocoPhillips

(COP) - Get Report

gained 67 cents, or 0.64%, to $105.77.

In another industry mechanical breakdown, ExxonMobil said it had discovered a leak in one of its Indonesian natural gas pipelines, which cut production by 300 million cubic feet per day, or around 23%. "A condensate leak was identified from a pipeline located between cluster three and four at the Arun field area of operations," ExxonMobil said in a statement. Natural gas today provides less than 1% of the world's liquid-to-gas supply.

Loading ...