Oil supplies dropped 2.7 percent last week and are down 15 percent since May, as OPEC resists calls for more oil until its members meet Sept. 10. Heating oil inventories languish 39 percent below year-earlier levels as U.S. refiners struggle to make enough of the fuel to meet winter demand.
"This market has a head of its own," said Tony Rosado, senior vice president of supply and marketing for Castle Oil Corp. in Harrison, N.Y., an independent fuel distributor in the metropolitan area. "If we get any kind of [cold] weather, forget about it."
Crude oil for October delivery rose 80 cents, or 2.6 percent, to $32.02 a barrel on the New York Mercantile Exchange. Prices are up 14 percent this month.
Heating oil for September delivery rose 5 cents, or 5.8 percent, to 96 cents a gallon on the Nymex, the highest closing price since October 1990. Intraday prices reached $1 a gallon on Jan. 31, also the highest since 1990.
The U.S. Energy Department has already warned consumers in the Northeast to expect higher heating bills this winter. Retail heating oil prices surged above $2 a gallon in February during an unexpected cold snap.
"The chances of seeing $2 heating oil [retail] this coming winter are higher than they were this time last year," Mr. Rosado said.
U.S. heating oil supplies were little changed last week, at a time when refiners usually build up stockpiles for the winter heating season. Inventories rose 16,000 barrels to 42.2 million in the week ended Aug. 18, the American Petroleum Institute said in a weekly report late Tuesday, widening a year-on-year deficit to 39 percent from 38 percent a week earlier. Supplies rose 2.1 million barrels the same week last year.
"It's scary to think what's going to happen if a cold snap hits the U.S. this winter," said Tsutomu Toichi, director at the Institute of Energy Economics in Japan.
The crude oil inventory decline to 279.7 million barrels left U.S. supplies close to the low of 279 million reached two weeks earlier, the lowest level since 1976.
"Even if OPEC announces an increase in production at the next meeting, it's questionable whether that will help the situation," said Chris Schachte, an energy analyst at GSC Energy Corp. in Atlanta. "It's not going to translate into heating oil by the time it gets cold."
Oil shares followed crude oil higher. Exxon Mobil Corp. rose $1.38 to $84.50, Royal Dutch Petroleum Co.'s New York shares gained $1.63 to $63.63, Chevron Corp. climbed $1.75 to $88.38 and Texaco Inc. advanced $1.63 to $53.81.
The 7.8 million-barrel decline in U.S. crude oil inventories came as the Organization of the Petroleum Exporting Countries said they wouldn't increase production for now. While Saudi Arabia said last month that an additional 500,000 barrels was needed daily, most other OPEC members said no decision will be made before the group meets next month.
Crude oil "prices seem to be comfortably above $30 here, day after day," said Tom Pena, an analyst and trader at Starsupply Petroleum Inc., in Englewood, N.J.
"It was in the mid-1980s that crude was last over $30 for any real period of time," he said. "No one thought we would sustain prices over $30, but now the market is getting used to the idea that crude might stay up here as long as the supply-demand balance remains as tight as it is."
While many members of OPEC appear unconcerned about current price levels, consuming nations are adamant that prices are too high.
President Clinton said he'll urge producing nations to supply more oil and will pass that message on to President Olusegun Obasanjo of Nigeria when he visits that country this week.