Oil prices jumped above the $70 level in Asian trade on Tuesday as experts forecast a potentially devastating Atlantic hurricane season that could push prices to the $100 mark, dealers said.
At 2.30pm local time, New York’s main contract, light sweet crude for July delivery, was up 29 cents at $70,25 a barrel from its close of $69,96 in the United States on Monday.
The June contract expired in New York trade on Monday, closing at $69,23.
Brent North Sea crude for July delivery was at $69,57, up 22 cents.
Crude prices halted their decline on Monday after US experts predicted as many as 10 Atlantic hurricanes in upcoming months, four of which could hit the US.
Analysts fear that a hurricane this year could push oil prices above $90 a barrel if it hits oil installations in the US Gulf of Mexico. This is what happened last August when the Katrina and Rita storms devastated US oil and refinery output.
“When the hurricane season starts, the US buyers will start to buy more and this could send prices above $90,” said Tetsu Emori, a Tokyo-based commodities strategist with Mitsui Bussan Futures.
“The outlook calls for a very active 2006 season,” the US National Weather Service said in a report released on Monday.
At the same time, it said that the six-month Atlantic hurricane season, which starts on June 1, is unlikely to reach the records set last year when there were 28 tropical storms, 15 of which strengthened into hurricanes. Seven of the hurricanes were considered “major” and four of those slammed into the US coast.
Daruisz Kowalczyk, a Hong Kong-based investment strategist with CFC Seymour, said that although the hurricane season this year is forecast to be milder, crude prices could still take a beating.
“Those hurricanes are a risk to the supply side and investors will put a premium into the price of oil for the risk to supply stability,” he said.
The commodities research arm of French bank Societe Generale said oil prices could reach $100 a barrel as a result of “a continuation of the massive capital inflows” in the commodities markets as well as a geopolitical event such as a US military strike on Iran or an oil embargo.
Iran, the world’s fourth-largest producer of crude oil, is locked in a war of nerves with Western powers, led by the US, which accuse the Islamic republic of using its nuclear research programme as a cover for developing nuclear weapons.
Tehran has said its nuclear research is for civilian energy purposes only.
Oil at $100 “would have a very significant impact on most economies, cutting GDP [gross domestic product] growth of industrial countries by an estimated 0,5 to 0,75 percentage points”, Societe Generale said.
If prices stay there for more than a year, the impact could rise to more than 1,5 percentage points, with US GDP expected to be slashed by 0,8 percentage points, it added.
A slowdown in the US massive economy is closely watched globally because the US is the biggest buyer of the world’s exports.
Prices at $100 a barrel also “would seriously aggravate global trade imbalances and be negative for especially the US dollar”, Societe Generale said. — AFP