[GJM] Fw: [globalnetnews-summary] Oil Rises Above $133 on U.S. Supply Drop, Bank Price Forecasts

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Oil Rises Above $133 on U.S. Supply Drop, Bank Price Forecasts
http://www.bloomberg.com/apps/news?pid=20601087&sid=atGDWAjDjdx8&refer=home
By Mark Shenk

May 21 (Bloomberg) -- Crude oil rose to a record above $133 a barrel as U.S. 
stockpiles unexpectedly dropped and banks raised price forecasts because of 
supply constraints and demand growth.

Inventories fell 5.32 million barrels to 320.4 million last week, the 
biggest drop in four months, the Energy Department said. Oil for December 
2016 delivery rose more than $20 a barrel, or 17 percent, after Goldman 
Sachs Group Inc. on May 16 raised its outlook to $141 a barrel for the 
second-half of the year.

``What we have here is a situation where essentially higher prices aren't 
generating any more supply,'' Paul Sankey, an analyst at Deutsche Bank 
Securities in New York said in an interview with Bloomberg radio. ``What we 
have to do is keep pricing the commodity higher until demand starts 
falling,'' which ``is around $150 a barrel.''

Crude oil for July delivery rose $4.19, or 3.3 percent, to settle at $133.17 
a barrel at 2:44 p.m. on the New York Mercantile Exchange. Oil touched a 
record $133.82 today and has more than doubled from a year ago. Futures, up 
more than 17 percent this month, are heading for the biggest monthly gain 
since September 2004.

Gasoline and heating-oil futures in New York also climbed to records. 
Gasoline for June delivery rose 9.21 cents, or 2.8 percent, to settle at 
$3.3965 a gallon, after reaching a record $3.41. Heating oil for June 
delivery rose 13.34 cents, or 3.5 percent, to close at $3.9084 a gallon, 
after touching an all-time high of $3.9304.

Higher Pump Prices

Pump prices are following futures higher. Regular gasoline, averaged 
nationwide, rose 0.7 cent to a record $3.807 a gallon, AAA, the nation's 
largest motorist organization, said today on its Web site.

An inventory increase of 300,000 barrels was forecast, according to the 
median of responses by 15 analysts surveyed by Bloomberg News before the 
inventory report's release.

The supply decline left stockpiles 0.9 percent below the five-year average 
for the week, the Energy Department said. Supplies were 0.8 percent above 
normal a week earlier.

Imports fell 7 percent to 9.24 million barrels a day, the report showed. 
Imports have averaged 9.86 million barrels a day so far this year, down 0.9 
percent from the same period last year, according to department figures.

``In this high-priced environment we are seeing refiners cut back on 
imports,'' said Antoine Halff, head of energy research at New York-based 
Newedge USA LLC. ``High prices and credit tightness are making it much 
harder to build supply.''

Brent crude oil for July settlement rose $4.86, or 3.8 percent, to $132.70 a 
barrel on London's ICE Futures Europe exchange. The contract touched $133.34 
today, the highest since trading began in 1988.

`Well Supplied'

The crude-oil market is ``well supplied,'' Libya's top oil official Shokri 
Ghanem said today, rejecting calls for the Organization of Petroleum 
Exporting Countries to increase production to curb prices. OPEC, which pumps 
more than 40 percent of the world's oil, isn't planning to meet before its 
next scheduled conference in September to review production, he said.

``OPEC is playing with fire,'' said Rick Mueller, director of oil practice 
at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``While they 
may be right from a fundamental standpoint about crude supplies, at this 
time it will take more than words from them to bring prices down. We will 
need to see more gestures like the Saudis made, to lower prices.''

Saudi Oil Minister Ali al-Naimi told reporters on May 16 that the kingdom is 
planning a 300,000 barrel-a-day output increase, to bring June production to 
9.45 million barrels a day.

``Once prices hit $150 or $200 like our friends at Goldman are saying, we 
are looking at $5 or $6 gasoline, which will really hurt demand and cause a 
recession,'' Mueller said.

Goldman Forecasts

Goldman analyst Arjun N. Murti said in a May 16 report that ``the 
possibility of $150-$200 per barrel seems increasingly likely over the next 
six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, 
predicting crude may trade between $50 and $105 a barrel through 2009.

U.S. oil-company executives told Congress oil prices should be between $35 
and $90 a barrel. Representatives of the five largest publicly traded oil 
companies appeared before the Senate Judiciary Committee to testify on 
record energy prices. Appearing today were representatives of BP Plc, 
ConocoPhillips, Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc.

The price of oil should be ``somewhere between $35 and $65 a barrel,'' John 
Hofmeister, president of Shell Oil Co., the Houston-based subsidiary of 
Royal Dutch Shell, said at the hearing today. Other executives said prices 
should be as much as $90 a barrel.

Strategic Reserve

Congress last week approved legislation to halt deliveries to the Strategic 
Petroleum Reserve in an effort to respond to record prices.

Airlines have been hit by higher jet fuel costs. The price of the fuel, the 
largest expense at many airlines, has climbed 88 percent in the past year 
and traded at a record $4.0592 a gallon in New York Harbor today.

AMR Corp.'s American Airlines, the world's largest carrier, said it will cut 
``thousands'' of jobs as it responds to high fuel prices and slowing demand.