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Oil Prices Near $61 a Barrel on Storm Fears

Posted on: Wednesday, 13 July 2005, 09:00 CDT

BUDAPEST, Hungary - Oil prices traded above $60 a barrel Wednesday over concerns about possible hurricane-related supply disruptions in the Gulf of Mexico. Holding prices back a bit was a report from the International Energy Agency, which lowered its forecast for global demand growth.

Also on Wednesday, the U.S. Department of Energy is scheduled to release its weekly petroleum supply data.

Light sweet crude for August delivery rose 8 cents to $60.70 a barrel on the New York Mercantile Exchange in electronic trading. On London's International Petroleum Exchange, August Brent rose 15 cents to US$58.97 a barrel.

The front-month Nymex crude futures contract had its peak settlement of $61.28 on July 6, when storm-related power outages disrupted some oil production and refining operations in the Gulf of Mexico, stirring up fears about lost output at a time of strong global demand.

While Hurricane Dennis did not cause the extent of damage that the market was braced for, it did leave a non-producing oil platform operated by BP Plc listing in the deep sea - an image that was broadcast on television and which only served to solidify traders' worries about what could happen.

"If we get a repeat of the huge devastation Hurricane Ivan caused last year, we are going to see prices spike considerably higher, led by fears over product supply," said Orrin Middleton, energy analyst with Barclays Capital in London.

"Given the current market dynamics, we simply cannot afford a repeat of Hurricane Ivan," Middleton said.

One factor moderating prices somewhat on Wednesday was the monthly forecast by the Paris-based IEA, which revised its global demand growth outlook down by 200,000 barrels a day to 1.58 million barrels a day in 2005, citing a weaker outlook for China and the United States.

However, the energy watchdog expects the pace of Chinese demand growth to pick up again in 2006.

Also on Wednesday, traders watched Tropical Storm Emily, which was about 260 miles southeast of Barbados, packing maximum sustained winds of 60 mph, the National Hurricane Center in Miami said.

Hurricane Dennis rolled through the Gulf of Mexico last week, and while it caused minimal damage, the U.S. Minerals Management Service said the storm forced a halt in production of nearly 5 million barrels of crude from July 8 to July 12 - less than 1 percent of the region's annual output.

Oil prices are around 55 percent higher than a year ago, but are still below the all-time inflation-adjusted high of $90 a barrel set in 1980.

In other Nymex trading, heating oil futures fell one and half cents to $1.7380 a gallon, while gasoline futures rose less than a penny to $1.77 a gallon.

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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.

Source: Associated Press/AP Online

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