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Oil Prices Slip Below $64 a Barrel

Posted on: Monday, 12 September 2005, 09:00 CDT

BUDAPEST, Hungary - Crude-oil prices slipped below $64 a barrel Monday as traders gauged news from the U.S. Gulf states, where Hurricane Katrina relief efforts gained momentum but some damaged oil refineries will remain shut for months.

"News coming in over the weekend that some production facilities might take longer to recover than originally expected is lending a slight bullish tone to the market, but this may disappear during the day," said Frederic Lasserre, an energy analyst with SG Securities in Paris.

Lasserre also said this week's inventory report from the U.S. is expected to contain "very, very bullish" numbers since it will be the first snapshot to reflect the full impact of Hurricane Katrina.

"Crude stocks, however, could prove less tragic than initially thought," he said.

Light sweet crude for October delivery fell 21 cents to $63.87 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. Gasoline dropped nearly 2 cents to $1.9404 a gallon, while heating oil was trading down slightly at $1.8955 a gallon.

Brent crude for October delivery fell 25 cents to $62.59 a barrel on the International Petroleum Exchange.

A U.S. nationwide survey released Sunday found that damage to Gulf Coast oil production pushed retail gas prices to historic highs in the past two weeks in the United States, with self-serve regular averaging $3 a gallon.

The weighted average price for all three grades surged by more than 38 cents a gallon to reach nearly $3.04 a gallon between Aug. 26 and Sept. 9, said Trilby Lundberg, who publishes the semimonthly Lundberg Survey of 7,000 gas stations around the United States.

The previous high weighted average for all three gasoline grades in the U.S. was $1.38 a gallon in March 1981, which would be $3.03 a gallon in current dollars.

Lundberg said prices could drop sharply in the coming weeks as gasoline imports flow in and demand eases with the traditional September drop-off, fewer drivers in storm-stricken areas and other consumers limiting trips to the pump.

On Saturday, more than 120 Gulf of Mexico oil and gas platforms were still shut down and nearly 60 percent of the region's normal daily oil production remained blocked from the market because of evacuations due to Hurricane Katrina, the federal Minerals Management Service said.

Britain's Treasury chief on Sunday blamed oil-producing countries in OPEC for high gasoline prices that have sparked threats of protests by British farmers and truck drivers.

Chancellor of the Exchequer Gordon Brown said he believed the international community could bring oil prices down but made no pledge to cut Britain's high fuel taxes, as some have demanded.

"OPEC is a cartel, of course, and I think it is under challenge," Brown told British Broadcasting Corp. television. "You have got a cartel that has limited production in the past and has been slow to respond to rising demand."

The Organization of Petroleum Exporting Countries, meanwhile, denied a report in German magazine Der Spiegel that the organization had decided to increase its crude-oil production at its September meeting.

OPEC said Der Spiegel incorrectly quoted acting Secretary General Adnan Shihab-Eldin as saying the organization had already decided to increase production.

OPEC said its members still have sizable remaining spare crude-oil production capacity, adding that it is considering an increase to ease the tight global supply situation in the wake of hurricane Katrina. The group next meets Sept. 19.

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Associated Press Writer Christopher Torchia in Singapore contributed to this report.

Source: Associated Press/AP Online

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