Crude Oil Passes $62 a Barrel
BUDAPEST, Hungary – U.S. refinery outages and forecasts of a higher number of storms in the Gulf of Mexico boosted oil prices Wednesday, with crude futures surpassing $62 and trading near their record highs.
Traders said prices were likely to hold steady ahead of the U.S. Department of Energy weekly inventories snapshot, released later Wednesday.
The report is expected to show declines in crude and gasoline stocks but a rise in distillates, which include heating oil, diesel and jet fuel.
"If we see a lower than 2 million barrel distillate build today, the market could go crazy again with prices heading for $65," said Deborah White, energy analyst at SG Securities in Paris.
"Given the significant amount of products we have lost because of refinery problems, there is no way prices could go down," White said.
Light sweet crude for September delivery gained 17 cents to $62.06 a barrel in electronic trading on the New York Mercantile Exchange.
The contract had settled overnight in New York at $61.89 a barrel, the highest ever since trading began on the Nymex in 1983. Oil is now around 40 percent more expensive compared to a year ago.
Gasoline rose more than half a cent to $1.7880 a gallon while heating oil edged up to $1.7288 a gallon.
In London, Brent crude for September delivery on the International Petroleum Exchange was up 20 cents at $60.82 a barrel.
Unplanned outages in the United States were fueling fears that output of oil products will fail to meet demand in an extremely tight market.
Murphy Oil Corp.’s Meraux, La., refinery, BP PLC’s Texas City, Texas, plant and Exxon Mobil’s plant in Joliet, Ill., have been shut down since last week either from fires or unscheduled maintenance. Another production facility in Norco, Ill., was also reported to have been closed for repairs.
Aging refineries in the United States are running at nearly 100 percent utilization, and analysts say output will struggle to keep pace with gasoline demand for summer and heating oil demand for winter.
Weather warnings were also rattling nerves and giving support to rising prices.
There could be 11 to 14 more tropical storms, including seven to nine more hurricanes, by the end of November, U.S. National Weather Service Director David L. Johnson said Tuesday.
Rising oil consumption has been eating into the limited amount of excess production capacity available, and that’s put energy traders on edge.
"Supply concerns have plagued the oil markets since December 2002 when a Venezuelan oil workers’ strike resulted in 500,000 barrels per day of lost crude production," said energy reporting agency Platts in a research note.
"From there on, petroleum disruptions became almost epidemic, spreading from one critical producing region to another, making global oil markets hypersensitive to any amount of lost producing or refining capabilities."
Iran’s impending decision to resume uranium enrichment, which Western government say is the first step to building nuclear weapons, is still worrying markets, but more for the long-term.
Tensions between Iran, the No. 2 producer within the OPEC cartel, and Western governments, especially the United States, the world’s largest energy consumer, also worry traders because Tehran can cripple markets by shutting off its taps.
"With the ability to manufacture nuclear weapons still several years away, the only real bargaining chip they have is their vast reserves of oil," said U.S. brokerage Fimat Inc. analyst Mike Fitzpatrick.
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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.