Back-to-back refinery fires in Texas and Louisiana sent crude futures back above $60 a barrel on Friday as the unplanned outages fanned fears that production may not be able to meet demand in coming months.
An explosion and fire at British Petroleum’s (BP) Texas City plant on Thursday night came hours after a fire at Murphy Oil Corporation’s 120 000-barrel-a-day Louisiana diesel hydrotreater, which removes sulfur from fuel. Murphy said damage to the unit was minimal, but offered no estimate of when it might restart.
The fire at the Texas City refinery was brought under control on Friday morning, a BP spokesperson told Dow Jones Newswires. An explosion at the same refinery in March killed 15 people.
”A number of disruptive news [reports] hit the market today, including the fire at a rig in India earlier this week and these added up and unnerved people,” said Jonathan Copus, energy analyst at London-based Investec Securities.
Traders were also looking ahead to second-quarter gross domestic product figures from the United States later on Friday for indications on oil demand.
Light, sweet crude for September delivery rose 40 cents to $60,34 a barrel in electronic trading on the New York Mercantile Exchange. It closed up 83 cents at $59,94 in New York floor trading on news of the fire at Murphy’s Meraux plant.
August delivery gasoline was up more than two cents to $1,7455 a gallon (3,8 litres), while heating oil was up half-a-cent to $1,6510 a gallon.
On London’s International Petroleum Exchange, September Brent gained 35 cents to $59,11 a barrel with traders expecting the contract to push up to $60 as buying momentum builds.
The BP refinery processes 433 000 barrels of crude oil a day and 3% of the nation’s gasoline. It was not immediately clear how much production was lost.
”It’s quite risky now,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. ”There are no bullish factors apart from BP. If the BP problem is over, then traders will look where to go, but it is not over.”
Traders have been on edge over limited-excess capacity, which leaves little room for production outages as demand, primarily from China and the US, eats into spare output.
Supply outages, such as refinery blackouts and weather-related shutdowns, have factored into crude’s upward movement in 2004 and much of this year. Oil prices are now more than 40% higher than a year ago.
”Worldwide, spare production capacity has recently diminished. In practice, only Saudi Arabia has any spare crude-oil production capacity available,” the US Department of Energy said in its latest short-term energy outlook.
”Despite projected capacity additions in Saudi Arabia and other Persian Gulf countries in 2005 and 2006, world spare capacity could decline from 2004 levels over the next two years if world oil demand grows more rapidly than expected,” it said.
Global demand is likely to rise in the fourth quarter of the year when the northern hemisphere winter kicks in and demand for distillates, which group heating oil, jet fuel and diesel, rises.
The US Energy Department’s midweek data snapshot showed crude oil stocks fell by 2,3-million barrels to 317,8-million barrels, or 7% above year-ago levels. Gasoline inventories declined by 2,1-million barrels to 209,2-million barrels, or about 1% below year-ago levels.
As expected, the supply of distillates, which group heating oil, jet fuel and diesel, grew by 3,1-million barrels to 125,8-million barrels, or 5% higher than last year.
Prices would need to reach $90 a barrel to match the all-time, inflated-adjusted high set in 1980. — Sapa-AP
Associated Press writer En-Lai Yeoh in Singapore contributed to this report