Oil prices rose on Wednesday, with New York’s main crude contract above $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 cents to $70,48 per barrel in electronic trading. It had surged to an all-time high of 70.85 dollars on Tuesday, as traders evaluated the damage to US 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 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 US government said on 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’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 on Wednesday of the weekly snapshot of US crude oil inventories.
”US stock figures out this afternoon will be closely watched, although their importance has been overshadowed by concern about the effect of Hurricane Katrina,” Tilley said.
According to US government data, Katrina has shut down an estimated 95% of crude production and 88% of natural gas output in the Gulf of Mexico — which accounts for a quarter of total US 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 industrialisation 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.” – Sapa-AFP