﻿ Oil prices touch new high | News | Al Jazeera

Oil prices touch new high

Oil prices have zoomed higher, touching a new high of $65 a barrel, with buyers focussed on refinery snags and shrinking US inventories.

    Oil prices have been going up relentlesly this year

    The latest rally - crude futures have risen 14% in three weeks - highlights just how nervous the market has become to just about any threat to output, even though analysts say the country has adequate levels of fuel in inventory to offset routine supply disruptions.

    Light sweet crude for September delivery climbed as high as $65 a barrel on the New York Mercantile Exchange. The contract settled $1.83 higher at $64.90 a barrel, the highest level since Nymex trading began in 1983.

    In other Nymex trading, gasoline futures jumped 7.39 cents to $1.8963 a gallon, while heating oil rose 6.22 cents to $1.8388 a gallon.

    Natural gas futures also surged, rising 42 cents to close at $9.071 per 1,000 cubic feet. Traders attributed the runup in part on extremely strong demand from gas-fired power plants.

    Rising fuel consumption 

    "Hiccups are an unfortunate reality of operating refineries"  

    Bryan Caviness,
    Fitch Ratings

    The heightened sensitivity comes amid strong demand in the United States and China, the world's top consuming nations, where high prices have only tempered rising fuel consumption slightly.

    "People talked about $60 crude slowing economies around the world. But here in the US, (Federal Reserve Chairman) Alan Greenspan is telling us the economy is doing great and getting stronger," said James Cordier, president of Liberty Trading Group in Tampa, Florida. "It bodes well for crude testing the $70 range."

    Even so, Cordier said he has been stunned by the recent runup in oil and gasoline prices and the lack of any response from motorists. Gasoline prices averaged $2.37 a gallon nationwide last week, while demand picked up by 1.4% from a year ago, according to the government data.

    Cordier said prices at the pump may continue climbing "until consumers are crying uncle, which they're not."

    Market nerves

    The transition of power in Saudi
    Arabia made markets nervous

    Energy markets have been extremely jumpy about a spate of refinery outages in recent weeks, though analysts and industry officials said refinery snags are not out of the ordinary for this time of year, when plants run hard to meet peak gasoline demand.

    "Hiccups are an unfortunate reality of operating refineries," said Bryan Caviness, who follows the industry for Fitch Ratings in Chicago. 


    "There have not been any more than what you typically see, but the impact (on prices) has certainly been greater than what you've seen in years past."

    The transition of power in Saudi Arabia last week following the death of King Fahd has also unnerved markets, as did the security-related closure of the US embassy earlier this week in the world's largest oil-producing nation.

    OPEC pledge

    While oil prices are about 46% higher than a year ago, they would need to surpass $90 a barrel to exceed the inflation -adjusted peak set in 1980.

    OPEC has pledged to pump more oil if needed, though the market has tended to brush off such talk. That's because worldwide demand is averaging some 84 million barrels a day, excess production capacity is limited to about 1.5 million barrels a day and the type of oil available - sour crude - is not the preferred variety for making transportation fuels.

    Oil inventories grew by 2.8 million
    barrels last week

    "The market was used to having 4 to 5 million barrels in spare capacity some 10 years ago and people would still like to have this cushion available, but this is not the case anymore," said Manouchehr Takin, an analyst with the Centre for Global Energy Studies in London.

    The latest supply report from the US Department of Energy showed that crude oil inventories grew by 2.8 million barrels last week to 320.8 million barrels, or 10% above year ago levels.

    US oil index

    The supply of distillate fuel, which includes heating oil, also increased, rising 2.6 million barrels to 129.9 million barrels, or 6% above last year.

    The agency data showed a 2.1 million barrel decrease in the nation's supply of gasoline, putting inventories at 203.1 million barrels, or 4% below last year.

    US refiners operated at 95% of capacity, a slight decline from the week before.

    Some traders say a spate of US refinery troubles - the latest reported by BP PLC on Wednesday - is evidence the industry and its aging infrastructure are having difficulty maintaining output at high levels.

    SOURCE: Agencies


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