Crude Oil Prices Spike on Demand Concerns
SINGAPORE – The price of crude spiked Friday, as a downward spiral that dominated the week’s trade ended on news of a fire at the massive Paraguana refining complex in Venezuela as demand concerns continued to weigh in with the Northern Hemisphere winter on the horizon.
Front-month September crude on the New York Mercantile Exchange jumped more than half a dollar to $63.79 a barrel midmorning in Singapore before easing slightly to $63.67, a gain of 40 cents.
The contract had closed 2 cents up at $63.27 a barrel on Thursday, ending four straight days of falls following its all-time price hit of $67.10 Aug. 12.
Gasoline was up 1 cent to $1.7999 a gallon while heating oil rose by more than a penny to $1.8780 in Asia.
Prices were buoyed by a fire which broke out late Wednesday at the Amuay refinery in Venezuela, slashing output from a usual 410,000 barrels a day to 150,000.
"Support is expected after the news," Energy reporting agency Platts said in its daily market outlook. The refinery is part of the Paraguana complex, one of the world’s largest refining installations.
Output is expected to return to normal in 48 hours, Venezuelan officials said.
On-edge traders are monitoring such news closely, as any cut in production could be seen as eating into the world’s already limited excess capacity.
Refinery blackouts in the United States pushed prices into new territory last week, but futures eased this week as traders took profit. Analysts said markets were calmed by the refineries coming back online and the end of summer – and the driving season.
But demand again is expected to pick up for the Northern Hemisphere winter, where jet fuel, heating oil and diesel become high-usage commodities.
"The oil market is possibly at that dramatic stage near the end of a big run, when price swings tend to be very dramatic, and the euphoria and panic levels are at extremes," said Dallas-based independent energy analyst Joe Duarte.
In Nigeria, hundreds of villagers closed down a Royal Dutch/Shell PLC pumping facility, angered over a compensation amount for an oil spill nearly two years ago.