• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Oil Prices Rose More Than $2 a Barrel As Traders Reacted to World News

Posted on: Sunday, 21 August 2005, 09:00 CDT

Oil prices rose more than $2 a barrel on Friday, bouncing back from a dip earlier this week as markets reacted to a fire at a massive refining complex in Venezuela and developments in Ecuador, where protesters had forced a halt to production.

News of explosions in the Jordanian Red Sea port of Aqaba and Israel also buttressed bullish sentiment.

Attackers fired at least three missiles from Jordan early Friday, with one narrowly missing a U.S. Navy ship docked in the port and killing a Jordanian soldier and another falling close to a nearby airport in neighboring Israel, officials said.

Meanwhile, markets remained wary over Iran's nuclear ambitions, with expectations that the situation could escalate, said Sandra Ebner, commodities analyst at Deka Bank in Frankfurt, Germany.

"I do expect to see new highs and I would not be too surprised to see oil prices breach $70 a barrel soon," Ebner said.

Light, sweet crude for September delivery gained $2.08 on the New York Mercantile Exchange to settle at $65.35 a barrel Friday -- still down 2.6 percent from the record intraday high of $67.10 reached Aug. 12.

Gasoline rose more than 4 cents to settle at $1.9039 a gallon, while heating oil rose more than 3 cents to settle at $1.8228.

On London's International Petroleum Exchange, October Brent crude futures jumped $1.96 to close at $64.36.

Also on Friday, Merrill Lynch raised its 2005 price forecasts by 10 percent to $55 a barrel for Brent crude and $56 a barrel for Nymex crude. For 2006, it raised its forecast 25 percent to $51 for Brent and $52 for Nymex crude.

Oil company stocks also rose Friday on surging futures prices. On the New York Stock Exchange, ConocoPhillips shares rose $1.47, or 2.4 percent, to close at $63.07; Exxon Mobil shares rose 71 cents, or 1.2 percent, to close at $58.82; Royal Dutch/Shell shares rose $1.02, or 1.6 percent, to close at $64.47; and Chevron Corp. shares rose 44 cents, or less than 1 percent, to close at $59.92.

On-edge traders are monitoring world news closely, as any cut in production could be seen as eating into the world's already limited excess capacity.

"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.

Markets were unsettled after news that a fire broke out late Wednesday at the Amuay refinery in Venezuela, slashing output from a usual 410,000 barrels a day to 150,000. 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.

Also in Venezuela late Thursday, President Hugo Chavez said the state oil company intends to build three new oil refineries in coming years, and blamed lofty oil prices on geopolitical tensions.

Venezuela is the world's fifth-largest oil-exporting country, and holds the largest conventional oil reserves outside the Middle East.

In Ecuador, protests in two Amazon provinces had ground oil production in the Andean nation to a halt Thursday before soldiers regained control of a number of oil wells on Friday. But Energy Minister Ivan Rodriguez said the recovery of about 30,000 barrels of crude hardly made up for Ecuador's lost daily output of 201,000 barrels, and said the economic impact was "worse than any war."

In Nigeria, hundreds of villagers closed down a Royal Dutch/ Shell pumping facility, angered over a compensation amount for an oil spill nearly two years ago.

Refinery blackouts in the United States pushed prices into new territory last week, but futures eased this week as traders took profits. Analysts said markets were calmed by the refineries coming back online and the end of the summer 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.

Source: Buffalo News

More News in this Category