Oil prices swung sharply upward on Friday as traders shrugged off the shock of the London bomb blasts and focused on a drop in United States crude stocks and possible supply disruptions because of Hurricane Dennis.
Light, sweet crude for August delivery was up 84 cents at $61,57 a barrel by midday in Europe. Unleaded gasoline jumped nearly four US cents to $1,8450 a gallon (3,8 litres), while heating oil was up more than a penny at $1,7885.
Brent futures were at $60,21 a barrel on London’s International Petroleum Exchange, up 93 US cents.
Prices had dropped nearly $5 on Thursday after blasts in London’s subway and a double-decker bus killed at least 50 people and left 700 injured.
Oil dropped from above $62 to near $57 a barrel — what Vienna’s PVM Oil Associates said was the largest price swing since the 1991 Gulf War — on concern the economy would be hurt by a decline in tourism. But prices recovered to close at $60,73, down 55 cents.
Hedge-fund managers tend to be cautious, said Tetsu Emori, chief commodities analyst at Mitsui Bussan Futures in Japan, ”and when such a terrorist attack happens they start to take profits to square their positions, bringing the price down sharply”.
PVM, however, suggested that the bombings could actually help spur prices upward by reminding the market of the terrorist threat.
”Fears of a supply shock if a producing country or a big refinery were hit … might add a few dollars to oil prices again in the months to come,” it said.
With the bombing shock behind them, traders focused on the US Energy Department’s weekly petroleum supply snapshot — a mixed picture, showing a sharp drop in domestic crude oil inventories and a higher-than-expected increase in supplies of distillate fuel, which includes heating oil, jet fuel and diesel.
Oil inventories fell by 3,6-million barrels last week, leaving supplies at 324,9-million barrels, or 7% above year-ago levels.
Gasoline inventories shrank by 900 000 barrels to 215,3-million barrels, or 3% above year-ago levels. The domestic supply of distillate fuel grew by four million barrels to 117,2-million barrels, or 3% above last year.
Prices also continued to be supported by concerns over possible supply disruptions at refineries in the Gulf of Mexico as Hurricane Dennis approached.
The hurricane killed four people in south-western Haiti on Thursday, lashing Caribbean coastlines with fierce 208kph winds and rain. Forecasters warned residents from Florida to Louisiana to be ready for Dennis this weekend.
Power outages caused by Tropical Storm Cindy on Wednesday disrupted a minor amount of oil production and refining operations in the Gulf of Mexico and sent oil prices to a settlement record above $61 a barrel.
Traders fear a repeat of last year’s Hurricane Ivan, which damaged oil platforms in the Gulf of Mexico and caused others to shut down for months. Almost 44-million barrels of oil production were lost between September 2004 and February 2005, while natural-gas output declined over the same period by 172-billion cubic feet.
”Prices will continue to be volatile until after the hurricane passes and traders have a better idea of whether the supply of crude will be affected,” Emori said.
Crude oil futures are about 55% above year-ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980. — Sapa-AP
Associated Press writer Gillian Wong in Singapore contributed to this report