Oil prices above $70 on refinery fears
Oil prices above $70 on refinery fears
Agence France-Presse, London
Oil prices rose on Wednesday, with New York's main crude
contract above US$70 on concerns that refineries may be unable to
produce sufficient fuel after being battered by Hurricane
Katrina, analysts said.
New York's main contract, light sweet crude for delivery in
October, rose 67 U.S.cents to $70.48 per barrel in electronic
trading. It had surged to an all-time high of $70.85 on Tuesday,
as traders evaluated the damage to U.S. oil facilities caused by
Katrina, which tore through the Gulf coast on Monday, killing
dozens of people.
The price of Brent North Sea crude oil for delivery in October
climbed 48 U.S.cents to $68.05 per barrel on Wednesday, having
struck a record peak of $68.89 on Tuesday.
Current prices are more than double the levels reached in
2003.
"The concern about oil production is of less importance than
the loss of refining capacity in a time of high demand and little
spare capacity," Sucden analyst Sam Tilley said.
The U.S. government said Monday that it could release
strategic crude reserves. However, unless refineries can actually
turn the crude into products, including gasoline and heating oil,
the move could fail to cool prices.
"It is unknown how extensive the damage to the refineries is,"
said Tony Nunan, manager for energy risk management with
Mitsubishi Corp's international petroleum business in Tokyo.
"If you don't have enough refining capacity, it doesn't help
you with the crude oil, so to some extent the market is right,"
he said.
Prices are unlikely to recede from current levels with the
market well aware that this is still the hurricane season, Nunan
added.
"The scary thing is that the hurricane season is not over
yet... so I don't see prices coming down."
Traders were meanwhile awaiting publication later Wednesday of
the weekly snapshot of U.S. crude oil inventories.
"U.S. stock figures out this afternoon will be closely
watched, although their importance has been overshadowed by
concern about the effect of Hurricane Katrina," Sucden's Tilley
said.
According to U.S. government data, Katrina has shut down an
estimated 95 percent of crude production and 88 percent of
natural gas output in the Gulf of Mexico -- which accounts for a
quarter of total U.S. oil output.
A total of 735 oil and natural-gas rigs and platforms remained
evacuated, according to the federal Minerals Management Service.
At least five big Gulf Coast refineries were shut, as was the
Louisiana Offshore Oil Port -- the nation's only deep-water oil
terminal.
After oil companies conducted flyovers of their operations in
the Gulf of Mexico, three rigs were reported missing in the
hurricane and at least nine were said to have lost their
moorings.
With the world's thirst for oil seen to increase, spurred on
by the industrialization of emerging economies including India,
prices will stay high in the long term, the head of Anglo-
Australian resources giant BHP Billiton said on Wednesday.
"Long term, I think we're all aware that there are billions of
people out there in the world that have something that we are
used to, which is the automobile, that they aspire to," chief
executive Chip Goodyear predicted at the Forbes Global CEO
Conference in Sydney.
"That's going to increase the amount of demand for petroleum
products."