World oil prices shot higher on Monday as Tropical Storm Wilma raised fresh concern over hurricane-battered production in the United States Gulf of Mexico.
New York’s main contract, light sweet crude for delivery in November, jumped $1,73 to close at $64,36 per barrel.
In London, the price of Brent North Sea crude for December delivery gained $1,09 to $60,57 per barrel in closing deals. The November contract closed on Friday at $59,35.
Phil Flynn at Alaron Trading said the new storm, along with a failed refinery restart, “will remind traders just how delicate our supply and demand situation is”.
Flynn noted that oil operations in the Gulf of Mexico are still recovering from hurricanes Katrina and Rita and that further damage could be devastating for the market.
Despite lower prices for much of last week, Flynn said, “it’s time to get back to the bullish reality. The correction in early October could become the running of the bulls, especially if Wilma threatens the Gulf Coast.”
The market ignored a lower demand forecast from the Organisation of Petroleum Exporting Countries (Opec) that could have helped bring down prices.
Marshall Steeves at Refco said Wilma was the main factor in the market on Monday.
A hurricane’s path is never sure but “it’s still a big concern on the market”, he said.
Wilma is the 21st named storm of the 2005 Atlantic hurricane season — matching the record number of named storms set back in 1933.
Not all US refineries in the Gulf of Mexico region have resumed operations after bearing the brunt of hurricanes Katrina and Rita in August and September.
“With oil production and refining facilities still not fully recovered, it has the potential to push the market sharply higher,” Sucden analyst Sam Tilley said.
Six US Gulf Coast refineries remain out of action owing to damage from Katrina and Rita, according to the latest data.
Crude futures smashed record high prices in nominal terms in late August following Katrina, striking $70,85 in New York and $68,89 in London.
Opec said on Monday that it has revised down its forecast for global oil demand growth in 2005 — but warned that another spike in prices is possible.
Updating previous forecasts, the 11-member oil cartel said that global demand will increase on average by 1,2-million barrels per day this year compared with 2004, putting demand 1,4% higher than last year.
Opec had previously estimated that demand would be 1,7% higher this year, but it said that demand has softened owing to the sustained high prices in the wake of Katrina and Rita in the US. — AFP