Updated from 12:34 p.m. EDT
Crude prices ended relatively flat Friday, as the bullish impact of a blowout U.S. employment report dissipated as the weekend approached.
The June crude contract closed up 13 cents at $50.96 on Nymex. Gasoline prices were little changed at $1.47 a gallon.
The Labor Department released its April jobs report Friday, showing unemployment held at 5.2%, and nonfarm payroll growth was better than expected.
Oil bulls view the labor data as a buying signal. Despite recent signs of an economic slowdown, analysts reiterated that high gasoline prices will not stop American motorists from taking vacations or compel them to alter their driving habits.
On Wednesday, the Energy Department said U.S. gasoline production was about 8.8 million barrels in the previous week, down slightly from a week earlier. The same report showed gasoline imports were above 1 million barrels in the week ending April 29, the fourth straight week that's occurred.
The report said gasoline demand was 9.1 million barrels a day, 0.9% higher than demand in the same time a year ago.
Although U.S. refineries are working at 91.7% capacity, the differentials between gasoline supply and demand are tight -- about 700,000 barrels as of last week. That's precious little spare capacity to buffer the economy from supply disruptions.
Many are wondering why crude prices haven't come down even as U.S. inventories have swelled to their highest levels in five years. Rick Mueller, senior oil analyst at Energy Security Analysis Inc., says that in some ways the recent gains in crude stocks have been meaningless to prices.
"The real growth in crude builds was actually in California, which is an isolated demand center that isn't that important to WTI prices," Mueller said. Of the 2.6 million-barrel increase in crude supplies reported Wednesday, the West Coast accounted for 2.1 million. The Midwest, or specifically Cushing, Okla., a key delivery point for Nymex crude, had a build of only 800,000 barrels.
West Coast market fundamentals have a limited impact on the Western Texas Intermediate prices, Mueller said. Refineries in the Midwest and the Gulf Coast are the major traders of the physical WTI crude, and inventory levels at those areas have more weight on prices.
Wednesday's inventory report also showed the U.S. is currently importing about 10 million barrels a day of crude, suggesting "OPEC is indeed working hard to keep prices down," said Mueller.
But most of OPEC's product is heavy sour crude, which has a limited impact on the price of light, sweet crude -- the commodity underlying the main Nymex contract.
Some companies, such as
, have the technologies to de-sulfurize heavy sour crude and are reaping profits from the heavy and sweet crude differentials.
said it plans to invest in heavy crude refining, and both
and Citgo Petroleum, the refining arm of Petroleos de Venezuela, are geared to process heavy sour oil.
Other refiners, such as
, decided not to invest in heavy crude refining technologies, based on an expectation that the crack spread of heavy sour vs. light sweet will eventually shrink. "Some refiners believe that demand for the heavy stuff will increase and so will the price," Mueller said.
In company news,
National Oilwell Varco
, which provides drilling equipment to exploration and production companies, said it earned $35.6 million, or 33 cents a share, compared with $11 million, or 13 cents a share, in the same period a year ago. Excluding a pretax charge related to its merger with Varco International, net income was $44.3 million, or 42 cents a share, in line with analysts' average estimate according to Thomson Financial. Shares rose 65 cents, or 1.53%, to $43.25.
The company cited a growing backlog for its new rig technology as its major strength, as orders increased 9% to $852 million, compared with $783 million in the fourth quarter of 2004.
shares jumped more than 4% after the company released its earnings report, despite missing Wall Street's estimates by 14 cents. Holly said first-quarter net income fell to $13.1 million, or 41 cents a share, compared with net income of $14 million, or 43 cents a share, in the same period a year ago.
Jacques Rousseau, analyst at FBR, said that Holly provided a positive outlook for its second-quarter refining margins, evidently convincing investors to buy its stock despite a slower-than-expected first quarter.
"After lower refining margins in January and February, March and April were much better. We should be seeing better performance during the second quarter. Also, you need to remember that Holly is a smaller company without much analyst coverage, which means any positive viewpoint can make bigger swings in its stock," Rousseau said. Shares rose $1.35, or 3.80%, to $36.91.
Shares of major oil producers were mostly trading higher Friday. Exxon Mobil rose 0.47%;
gained 0.41%; ConocoPhillips increased 0.48%;
gained 0.03%; and
was unchanged at $62.08.