Oil prices gained slightly on Monday on expectations of higher demand for heating oil as the northern-hemisphere winter approaches, stretching supplies strained by the slow recovery of United States crude production following back-to-back hurricanes.
By mid-afternoon in Singapore, light, sweet crude for November delivery on the New York Mercantile Exchange rose by four cents to $66,28 a barrel in Asian electronic trading. The contract on Friday slipped 55 cents to settle at $66,24 a barrel.
November Brent futures at London’s International Petroleum Exchange opened at $64,63 a barrel, 15 cents higher than Friday’s settlement, before slipping to $63,56 a barrel.
Heating oil fell nearly half-a-cent to $2,126 a gallon (3,8 litres), while gasoline rose almost two cents to $2,1155 a gallon.
Concern is growing that damage caused by hurricanes Katrina and Rita will hurt refineries’ efforts to gear up for the winter, the peak season for production of distillate stocks — fuels that include heating oil, jet fuel, kerosene and diesel.
”The longer-term outlook is bullish for prices going into the fourth quarter, with heating-oil demand now being in focus,” said Victor Shum, oil analyst at Texas-headquartered energy consultants Purvin & Gertz in Singapore.
”We will watch the weather again, but not the hurricane season so much as how cold the winter will get,” Shum said.
Analysts said much depends on how quickly oil- and gas-production facilities can come back online in the aftermath of the hurricanes, which shuttered more than 7% of annual US oil production and more than 5% of annual natural-gas production.
But recovery remains slow, with 98% of the area’s crude production still shut in and natural gas output down 79%, the US Minerals Management Service said. The region usually produces 1,5-million barrels of crude oil a day. It wasn’t clear when output would fully recover.
”[With] a lot of questions concerning productive infrastructure in the Gulf still unanswered, it is difficult to envision any scenario right now that has prices retreating too far,” said Mike Fitzpatrick, of Fimat USA. ”Barring a miracle, don’t look for much relief until spring.”
Crude oil prices hit an all-time high of $70,85 briefly on August 30, after Katrina touched down. They remain about 32% higher than a year ago, when Hurricane Ivan disrupted oil production and refining in the Gulf.
Meanwhile, November natural gas was flat at $13,921 per million British thermal units. Last Thursday, it settled at a record high of $14,196.
Natural-gas futures have risen about 18% since Katrina hit, and are about 74% higher than they were two months ago. — Sapa-AP