clarinews@clarinet.com (WALTER ANDREWS) (02/10/90)
_U_n_i_t_e_d_ _P_r_e_s_s_ _I_n_t_e_r_n_a_t_i_o_n_a_l The market's belief that there is a relative abundance of supplies drove gasoline prices down more than a penny a gallon on the New York Mercantile Exchange Friday and nearly 5 cents on the week, sparking a retreat in crude values. ``The (market-moving) fundamentals, as perceived right now, is that there is plenty of gasoline around,'' said Harvey Budkofsky, energy futures specialist with Cargill Investor Services in New York. ``The high inventory numbers, that's what's giving the market a negative tint right now,'' echoed George Konikowski of New York's Smith Barney Harris Upham & Co. He was referring to the American Petroleum Institute's weekly report Tuesday showing crude oil, gasoline and heating oil inventories rose 7.7 million, 4.6 million and 4.5 million barrels respectively last week. Gasoline had risen a total of 16.8 million barrels in the three prior weeks. A month ago, gasoline supplies had fallen way below normal levels as a result of the December freeze that shut down U.S. Gulf Coast refineries and reduced nationwide refinery output by more than 11 percent. Unleaded gasoline for March delivery skidded 1.61 cents on the Merc Friday to 59.56 cents a gallon, 4.66 cents less than a week ago. On the New York Harbor cash market, it was bid 58.85 cents a gallon, down 1.65 cents on the day and 4.50 cents on the week. The benchmark West Texas Intermediate crude for March delivery fell 35 cents to $21.74 a barrel, $1.28 below last week's Merc close. WTI fell 40 cents to $21.75 a barrel on the U.S. Gulf Coast cash market, $1.25 below last week. And three refineries -- Sun Co., Radnor, Pa., Marathon Oil Co., the Findlay, Ohio unit of USX Corp. and Citgo Petroleum Corp., Tulsa, Okla. -- cut by 75 cents Friday the posted price they will pay for crude at the wellhead to $20.75 a barrel for WTI. Konikowski thought WTI prices might have fallen more but for the reluctance of some U.S. refiners to accept foreign crude. ``I'm hearing some of the refiners don't want to accept foreign crude, which is bidding up WTI,'' the analyst said. But he added, ``I think we have a little more to go on the downside for crude because of the high inventory numbers.'' Heating oil March futures contracts slipped to 55.08 cents a gallon, down 0.24 cent on the day and 3.14 cents on the week. The produce was bid 55 cents a gallon on the New York Harbor cash market, less 0.70 cent on the day and 4.25 cents on the week. Despite weak demand resulting from unseasonably warm weather recently, the analysts did not see heating oil prices falling more without a further drop in crude because of the narrow ``crack spread'' -- the difference between the price of heating oil and the crude it is made from. The crack spread has has now fallen to $1.39 a barrel. The low demand for heating oil is reportedly also prompting some refiners to shutdown for an early start on the normal ``turnaround'' of their plants to emphasize output of gasoline instead of heating oil output, the analysts said. This in turn lowers worldwide demand for crude, they said. Nevertheless, the Merc set three new records for open interest WTI contracts this week suggesting heavy crude trading lies ahead. It registered a record 305,855 contracts Wednesday, 313,194 Thursday and 317,383 Friday. An open interest contract is when a trader takes a futures position to buy or sell awaiting action by another trader to complete the deal. On the European cash market, Britain's widely traded North Sea Brent crude slipped 7 cents to $19.53 a barrel. The United Arab Emirates' Dubai light -- the key OPEC crude from the Middle East exported mainly to the Far East -- eased down 2 cents to $16.53 a barrel, 42 cents less than last Friday.