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Oil above $63 ahead of U.S. stock data

Posted on: Wednesday, 10 August 2005, 08:09 CDT

By Janet McBride

LONDON (Reuters) - Oil climbed further above $63 a barrel on Wednesday ahead of U.S. stock figures that could push prices toward a new record high if the world's biggest consumer is seen to be drawing heavily on its fuel supplies.

Worries over disruptions to Middle East oil lingered as the United States reopened its missions in top exporter Saudi Arabia after a security threat forced their closure Monday and Tuesday.

"The threat to U.S. installations in Saudi Arabia is just the latest issue to roil sentiment and support crude oil while U.S. refining stress supports the products," analysts at Refco said in a report.

"The energy futures markets backed off a bit on Tuesday but unless the (U.S. stock numbers) are especially bearish we expect the uptrend to resume," the report added.

U.S. light sweet crude was up 55 cents at $63.62 a barrel at 1246 GMT, short of Tuesday's all-time high of $64.27. London Brent crude was up 75 cents at $62.73.

With U.S. crude averaging above $53 a barrel for the year to date, in real terms prices are still below the $80 a barrel average of 1980, after the Iranian revolution.

FEELING STRAIN

A Reuters poll of analysts predicted a slight fall in U.S. crude oil inventories as imports eased. Unexpected refinery shutdowns and strong demand from motorists were seen pulling down gasoline supplies. The stocks data is due at 1430 GMT.

"The U.S. statistics today are very important. A lot of people will be looking at the crude import numbers, which could be a wild card," said Mark Keenan of MPC Commodity Fund. "Gasoline is also a focus."

Crude oil producers and refiners have struggled to keep up with demand growth over the past two years, reducing the cushion of spare capacity needed to make up for any sudden shortfall, such as a disruption to exports from the Middle East.

On Wednesday, BP said its Schiehallion North Sea oilfield would be down until the end of the month as it repairs fire damage. Unplanned closures and scheduled maintenance have cut around 10 percent of North Sea output in August.

In the United States, where refinery problems have pushed gasoline prices to historic highs, BP said it had shut a gas oil hydrotreater at its Texas City refinery.

Tony Nunan, a manager at Mitsubishi Corp's international energy business in Tokyo, said crude prices of $65-$70 a barrel were a distinct possibility as winter approached.

"It's hard to be bearish in a market like this," he said.

News late on Tuesday that the U.S. Energy Information Administration (EIA) had made big cuts to its projections for oil demand for the rest of this year and into 2006 did little to dampen the bullish mood in Europe on Wednesday.

Nor did OPEC's reiteration of its commitment to "reasonable prices," as both traders and the cartel say it is a shortage of refining capacity, not crude oil, that has pushed prices up more than 45 percent this year.

Source: REUTERS

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