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Last updated on April 16, 2014 at 8:52 EDT

Oil hits record high

July 7, 2005

By Maryelle Demongeot

SINGAPORE (Reuters) – Oil prices climbed to a record high
over $61 on Thursday as the year’s first hurricane threatened
already reduced U.S. Gulf production, stoking fears that an
active storm season would hamper winter stock-building.

U.S. light sweet crude for August delivery hit a high of
$61.62 a barrel in early Asian trade, having broken above $61
for the first time on Wednesday. It was trading at $61.55 a
barrel by 0415 GMT, up 27 cents from the U.S. close.

Brent crude oil in London climbed 35 cents a barrel to
$60.20, also a record.

Oil prices have gained some 9 percent from a week ago and
are up a hefty 46 percent from the beginning of the year as
traders fear refiners are ill prepared to meet peak seasonal
demand this winter, especially for high-demand distillate
fuels.

Early storms in the U.S. Gulf of Mexico compounded those
anxieties by threatening both crude production and refinery
operations, impairing oil companies’ ability to build up
supplies.

Tropical Storm Dennis was upgraded on Wednesday to become
the season’s first official hurricane as it plowed through the
central Caribbean, putting it on track for the oil and natural
gas fields off the Gulf Coast on Sunday, the National Hurricane
Center said.

Cindy, which slowed to a tropic depression after hitting
land, had forced energy companies to shut in some 190,000
barrels per day of output in the Gulf of Mexico and some
refinery units to close, officials and the U.S. government
said.

The unusually early appearance of four named storms backed
up forecasts of an active hurricane season and evoked memories
of last September’s Ivan, which knocked out 45 million barrels
of Gulf output and helped oil prices climb past $50 a barrel
for the first time.

“A hurricane should have this kind of impact,” said Tetsu
Emori, chief commodities strategist at Mitsui Bussan Futures.
“There are no bearish factors in the market. It is very
difficult to see prices going down quickly.”

REFINERS HARD PRESSED

Oil prices have soared despite the absence of any sudden
supply outages in the first half of this year, with speculators
more focused on a tight fourth quarter.

“Traders are betting this run of luck wouldn’t continue for
the northern winter build-up — so Hurricane Dennis is, in a
sense, part of the script,” Tobin Gorey, commodity analyst for
the Commonwealth Bank of Australia, said in a note.

Speculators are guessing that refiners will be hard pressed
to build up enough inventories of distillates — including
heating oil and diesel — before the winter, causing prices to
spike as consumers worldwide scramble for heating fuels.

In June, U.S. distillates demand averaged an unusually
strong 5.7 percent more than the same period last year and
gasoline demand was 2 percent higher, U.S. data showed.

And although U.S. crude oil inventories are healthy at near
their highest in six years, distillate stocks are in the lower
half of their normal range for this time of year.

Data due later on Thursday is expected to show crude stocks
down 1.1 million barrels but distillates inventories up 1.3
million barrels as refiners ramp up runs, analysts polled by
Reuters said on Wednesday.

OPEC should wait and see what prices do before reviving
discussion of a second production hike of 500,000 bpd, Iranian
Oil Minister Bijan Zanganeh said on Wednesday.

OPEC President Sheikh Ahmad al-Fahd al-Sabah said earlier
the cartel would consider raising output limits if prices
topped $60 a barrel again but analysts say more crude
production is unlikely to cool a market that is rising due to
refinery bottlenecks.