Oil Back Above $60 a Barrel Energy Department Raises Price Forecast to $59 Until September

Crude futures briefly jumped more than $2 a barrel Tuesday after the Energy Department raised its oil-price forecast by $6 a barrel and as traders remain worried that summer storms in the Gulf of Mexico could curtail petroleum output.

The Energy Department, which oversees U.S. supply and demand statistics, said Tuesday that it expects oil prices to average $59 a barrel through September, up from its estimate of $53 a barrel a month ago.

After briefly surging past $61 a barrel, light sweet crude for August delivery climbed $1.70 to settle at $60.62 a barrel Tuesday on the New York Mercantile Exchange.

While the impact of Hurricane Dennis was not as bad as originally feared – even with BP reporting that one of its offshore platforms was listing – traders are keeping an eye on freshly brewing Tropical Storm Emily churning toward the Caribbean.

Just two days after Hurricane Dennis plowed into the Gulf Coast, petroleum companies Tuesday restarted scores of production platforms in the Gulf of Mexico that were evacuated as the storm approached.

According to the U.S. Minerals Management Service, 64 platforms were shuttered at midday Tuesday, down sharply from 359 on Monday when 1.4 million barrels, or 96 percent of the Gulf’s normal daily oil production, was interrupted.

By Tuesday, the amount of normal oil production that was being kept off the market had dropped to 57 percent, or 857,975 barrels, the MMS said. The Gulf normally produces about 1.5 million barrels per day from 819 staffed platforms.

Since the pre-Dennis evacuations began Friday, 4 million barrels of oil production have been shut in, about 0.7 percent of the Gulf’s annual production of 547.5 million barrels, the MMS said.

Since Friday, 18 billion cubic feet of gas have been delayed, the MMS said. The Gulf normally produces 3.6 trillion cubic feet of gas annually.

The impact of Dennis was not as bad as some traders originally anticipated. Last year’s sweep of Hurricane Ivan through the Gulf left behind damaged production platforms and caused others to shut down for months. Almost 44 million barrels of oil production were lost because of Ivan between September 2004 and February 2005 because of Ivan-related damage.

BP LLC reported that its Thunder Horse platform, 150 miles southeast of New Orleans in about 6,000 feet of water, was listing. The Thunder Horse field is being developed and is not producing petroleum. Exxon Mobil Corp. is a partner on the Thunder Horse project.

The platform had been evacuated Friday in anticipation of the storm and the damage was discovered Monday by a passing vessel, BP said.

While there was scant indication Dennis disrupted any Gulf refinery operations last weekend, a handful of power outages from Dennis’ predecessor, Tropical Storm Cindy, continued to dog refineries in Louisiana and Mississippi.

“As of now it looks like his (Dennis’) path was east of pipelines and refineries and we can breathe a sigh of relief,” said Phil Flynn, analyst with Chicago-based Alaron Futures and Options in his daily research note. “Still, we have to be on guard somewhat because as we learned from Hurricane Ivan that sometimes the damage from the storm isn’t always immediately apparent.”

Adding to bullish sentiment for oil prices Tuesday were expectations that today’s inventory snapshot from the U.S. government would show a decline in crude oil inventories.

“People seem to have taken the consistent view that the U.S. statistics are always bullish and markets respond accordingly every week,” said Julian Lee, energy analyst with the London-based Center for Global Energy Studies.

Meanwhile, the Organization of Petroleum Exporting Countries said it was again ready to do its best to lower prices by releasing additional barrels. Earlier OPEC pledges were shrugged off by the market.

The official Kuwait News Agency quoted cartel spokesman Abdul Rahman Al-Khareiji as saying Monday it was prepared to add 500,000 barrels to help rein in prices, now 50 percent higher from a year ago.

“If prices continue to bounce around current levels, I believe there is sufficient will among OPEC members to have a quota increase in place soon,” Lee said. “Should we see prices retreat in the coming days however, all that talk about output increase will evaporate.”

Associated Press writers Brad Foss in Washington, Alan Sayre in New Orleans, Edith Balazs in New York and En-Lai Yeoh in Singapore contributed to this report.