Iran's Oil Ministry

Oil Falls a Third Day on Signs U.S. Refiners Increased Output
By Mark Shenk
July 24 (Bloomberg)

Crude oil fell for a third day on speculation that U.S. refineries are increasing their fuel production and a signal that OPEC might be willing to pump more.

A report tomorrow may show refineries operated at 91.6 percent of capacity, a 10-month high, according to a Bloomberg News survey. OPEC will raise output if required, an official of Iran's Oil Ministry said. Hedge-fund managers and other large speculators cut long positions, bets that prices would rise, last week, according to the U.S. Commodity Futures Trading Commission.

``We are seeing a shift in sentiment,'' said Tim Evans, an energy analyst at Citigroup Inc. in New York. ``Rising refinery runs will eventually boost product stocks, and if they are comfortable you don't need a long position in crude.''

Crude oil for September delivery fell $1.57, or 2.1 percent, to $73.32 a barrel at 11:23 a.m. on the New York Mercantile Exchange. Futures reached $76.13 on July 20, the highest intraday price for a front-month contract since Aug. 10. Prices are up 20 percent this year.

Brent crude oil for September settlement declined $1.56, or 2 percent, to $75.30 barrel on the London-based ICE Futures exchange.

``If the oil market needs it, OPEC will inject more oil into it,'' said Javad Yarjani, head of OPEC affairs at Iran's oil ministry, according the Islamic Republic News Agency. Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries. Saudi Arabia is the largest producer.

`Only Real Debate'

``The Iranians are normally price hawks, so this is a sign that the only real debate at the next meeting will be about how large the increase will be,'' Evans said.

Oil ministers from OPEC's 12 members will meet on Sept. 11 in Vienna to discuss production targets. The group pumps about 40 percent of global crude supply.

``I have received no complaints from any customers about a shortage of crude supplies,'' Qatari Oil Minister Abdullah bin Hamad Al-Attiyah said in a telephone interview today. ``OPEC should move when there is strong evidence that there is a shortage in crude supplies.''

OPEC members have said that oil markets have plenty of crude oil and price increases were caused by geopolitics and refining bottlenecks. The 10 members that have quotas pledged to trim a total of 1.7 million barrels a day from production in two rounds of cuts, one that started Nov. 1 and another that took effect Feb. 1.

`Critical Point'

``We're at a critical point,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. If we can't break out above $77.50 and test the old highs, prices could be heading to the $60 area. If prices get above $77.50, I see us rising $17.50 higher as we breach the old record.''

New York oil rose to a record $78.40 a barrel on July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

Suncor Energy Inc. said yesterday that its oil-sands production is returning to full strength after a 50-day shutdown at a Canadian processing plant. The shutdown began May 31 and cut output by half, to roughly 121,000 barrels a day, the Calgary- based company said. Canadian oil travels through pipelines to the U.S. Midwest.

The crude-oil market often follows gasoline during the summer driving season. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.

Gasoline for August delivery plunged 5.34 cents, or 2.5 percent, to $2.0507 a gallon in New York. Futures touched $2.031 a gallon, the lowest since April 18. Prices are heading for the ninth decline in 10 days.