Transcripts

Oil Traders Get A Crude Surprise

SUSIE GHARIB: A sharp late day sell-off on Wall Street today, as bond yields rose and oil prices fell. The Dow tumbled 146 points. The NASDAQ lost 26. Oil stocks were big losers on a new government report showing a much bigger than expected rise in crude stockpiles. In New York trading, August light sweet crude futures slid $0.68 to $68.86. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Absent news of conflict in the Middle East or of refinery problems in the U.S., traders have only the weekly inventory numbers to go on. So crude oil futures sold off sharply right after the Energy Department reported an unexpectedly big increase in inventories in the latest week. Crude stocks rose 6.9 million barrels and are running well ahead of the year-ago level. Gasoline inventories rose 1.8 million barrels. That's considered bearish for prices. But prices rebounded later in the trading session. Energy trader Chris Matroni of Man Financial says he sees crude prices continuing to rise near term, although staying below the $78 a barrel record.

CHRISTOPHER MOTRONI, OIL TRADER, MAN FINANCIAL: We're still looking to the upside. If the contract value of August gets below $67.10, then you're going to see a little down period. But if you stay above $67.10, you're going to see it run to the upside -- I see it pushing $70.

GURVEY: Some of today's market volatility was a result of contract expiration factors. The July contract went out at the close. But also weighing on traders' minds was the discouraging news that domestic refinery utilization fell, indicating continuing maintenance problems. Refineries produced only 87.6 percent of their rated capacity for the week. That is about 6 percent below utilization at the same time last year and that is considered bullish for prices. Analyst Linda Rafield of Platt's says gasoline prices will rise if refineries cannot get on top of their production problems.

LINDA RAFIELD, SR. OIL ANALYST, PLATTS: You can have a lot of crude oil, but if you don't have refining capacity, there's not much you can do with it. A barrel of crude oil is fairly worthless unless you can refine it into a product. So we need to see these run rates at much higher levels, particularly since July 4th is the onset of peak demand season.

GURVEY: Analysts do not expect motorists to get any relief at the gas pump this summer, not with demand rising and refinery production continuing to fall. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.