Oil May Rise on Declining U.S. Gasoline Supplies, Survey Shows

By Mark Shenk

Aug. 15 (Bloomberg) -- Crude oil may rise next week as U.S. gasoline inventories fall because refineries are cutting output in response to low profit margins.

Nineteen of 30 analysts surveyed by Bloomberg News, or 63 percent, said prices will increase through Aug. 22. It was the most bullish response since December 2006. Seven of the respondents, or 23 percent, said oil will be little changed and four said there would be a drop in prices. Last week 37 percent expected a decline and 34 percent said there would be a rise.

U.S. gasoline supplies dropped 6.39 million barrels to 202.8 million barrels last week, the biggest decline since October 2002, according to an Energy Department report on Aug. 13. Refineries operated at 85.9 percent of capacity, down 1.1 percentage point from the week before, the report showed.

The supply report ``was one of the most bullish in a year,'' Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky, said yesterday.

Lower margins, or the profitability of refining, reduced the incentive for refiners to process crude oil into gasoline and other fuels. The margin, or crack spread, for making three barrels of crude into one of heating oil and two of gasoline has dropped 51 percent to $9.959 a barrel since June 3.

Crude oil for September delivery fell 19 cents to $115.01 a barrel so far this week on the New York Mercantile Exchange. Futures have dropped 22 percent since touching $147.27 a barrel on July 11, the highest since trading began in 1983.

The oil survey has correctly predicted the direction of futures 49 percent of the time since its start in April 2004.

Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

RISE NEUTRAL FALL
19 7 4

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.