Oil Rebounds, Stops 6-Day Slide

Thursday saw a slight jump in oil prices as rumors of refinery shutdowns precipitated jitters over the stability of gasoline supply.  The rebound ended a six-day skid suffered by oil prices.  

U.S. crude was up by 27 cents following a brief slide below the $60 per barrel level, the lowest since mid-May.  Prices of crude fell consistently from $71 per barrel in the past six trading sessions.  Meanwhile, the London Brent crude also went up by 67 cents settling at $61.10 per barrel.  

Refineries Shutting Down

The United States RBOB futures shot up to 3.05 cents or 1.87 percent settling at $1.6638.  The movement was precipitated after Valero Energy announced that it has begun shutting down its refinery in Aruba due to poor economic positions.  

Furthermore, the Royal Dutch Plc said that the company is reviewing the operations of its Montreal East refinery in Canada.  Company officials said that the review may lead to closure and sale of refinery assets as the oil industry continue to struggle against weak profit margins.  

Tim Evans, energy consultant of Citi Futures Perspective said that he sees significant bargain hunting in the gasoline market.  Evans also said that the report of Valero Energy and the review being conducted by Shell could make the impression that gasoline supply is far from secure.  

Gasoline Inventories Remain High

Typically, summer gasoline season peaks during the 4th of July Independence Day holiday.  However, the weekly U.S. inventory data released Wednesday has shown significant build up of gasoline stocks.  This pushed down gasoline prices to 5.74 percent on Wednesday.  

The world recession has battered the demand for global oil which led to steep build up of inventory.  This condition weighed heavily on the markets.  

In the United States, the inventories of distillates, including diesel fuel used for the transport of goods, registered a 25-year high last week.  This build up of inventory was pushed by significantly lower demand, according to government statistics.  

The top two oil firms also have high levels of inventories in China, the number 2 oil consumer, in June.   This was brought about by higher refinery runs and sluggish consumption and demand.  

Recovery Still Far Away

The optimistic reading of early recovery from global recession pushed oil demands higher.  This lifted crude prices from $33 per barrel in December to over $70 per barrel last month.  However, weak fundamentals are weighing down the prices.  

Experts believed that the performance of world oil prices shows that recovery is still far away.