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Oil Prices Rise As Storm Nears Oil Fields

Posted on: Monday, 18 July 2005, 06:00 CDT

VIENNA, Austria - Crude-oil prices headed upward Monday as Hurricane Emily howled its way toward key oil fields that supply the United States and oil companies evacuated workers in Mexico's Yucatan peninsula.

Analysts said that beyond the storm's immediate effects on prices, traders were betting on some damage from the storm and buying long - speculating on a relatively bullish market in the coming months - because of the effects of Emily and other seasonal storms.

Light, sweet crude for August delivery was up 24 cents to $58.33 a barrel by midday in Europe.

Heating oil rose less than half a cent to $1.6659 a gallon, while unleaded gasoline was down by more than a cent at $1.6760 - apparently reflecting the lingering effects of U.S. Energy Department data last week showing gas stocks were high.

On London's International Petroleum Exchange, Brent futures for September delivery rose 34 cents to $57.95 a barrel.

At the forefront of traders' fears was Hurricane Emily, packing sustained winds of 145 mph and closing in on Yucatan and the giant Cantarell oil field after slicing through the Caribbean. A direct hit could instantly cut off around 3 percent of the global supply of 84 million barrels a day, analysts said.

While forecasters predict the storm would not smash into U.S. rigs in the Gulf of Mexico, responsible for around 30 percent of total American output, many oil companies were shutting down platforms as a precaution, and that was expected to disrupt the supply flow.

Shell abandoned three offshore facilities, suspending output of around 1,000 barrels daily and halting 20 million cubic feet of gas production. Mexico's state oil company, Petroleos Mexicanos, has evacuated its Bay of Campeche staff on offshore rigs and closed its taps.

"While there will be some fluctuation in intensity as Emily approaches the Yucatan, the storm will largely be in a favorable environment until landfall near Cozumel, Mexico later tonight," weather trackers Accuweather said.

Petroleos Mexicanos exports 80 percent of its 3.4 million barrels in daily production to the United States, the world's largest consumer of energy. Dow Jones Newswires reported it had earlier suspended production amounting to nearly half a million barrels of crude.

Vienna's PVM Oil Associates suggested Emily was a boon to speculators "banking on the aftereffects of the Gulf of Mexico outages in particular underpinning prices," noting an increase in long positions.

The young 2005 Atlantic hurricane season has been unusually active, and analysts are warning there are more to follow Emily and the earlier Hurricane Dennis.

Last year's Hurricane Ivan hurt output and pushed prices upward after it damaged pipelines and oil rigs.

Elsewhere, Iraqi oil workers from the country's key southern oil fields went on strike Sunday, demanding better pay and warning that more labor action could follow. Samir Jassim, a spokesman for the state-owned South Oil Co., said production was not immediately affected.

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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.

Source: Associated Press/AP Online

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