| Crude Oil Prices Leap on Supply Worries
Associated Press | August 24, 2005
By GEORGE JAHN
VIENNA, Austria -- Crude oil prices rose above $66 a barrel Wednesday amid supply concerns in advance of the release of the latest U.S. petroleum inventories report and an approaching storm that could hurt Gulf of Mexico output.
Crude oil for October delivery on the New York Mercantile Exchange rose 62 cents to $66.33 a barrel by midday in Europe. The front-month contract is nearly 50 percent higher than a year ago and hit an all-time high of $67.10 Aug. 12.
"Apparently, the emergence of the new storm is supporting gains, in addition to some expectations that the Energy Information Administration report will show a decline in U.S. commercial crude stocks," said Ken Hasegawa, commodities broker at Tokyo-based Himawari CX.
On London's International Petroleum Exchange, October Brent crude futures rose 56 cents to $65.21 a barrel.
Nymex heating oil gained 1.5 cents to $1.8340 a gallon while gasoline rose nearly 2 cents to $1.8750 a gallon.
Later Wednesday, the U.S. Department of Energy's Energy Information Administration will release its midweek supplies report. Analysts are expecting crude and gasoline stocks to fall, because of the approaching end of the North American summer driving season.
The supplies report is closely monitored for demand, usage and refinery production clues from the world's largest energy consumer.
"The markets are focused on event risk, and the fact that any small disruption in production, due to the thinness of refinery capacity, could lead to a short-term hiccup," said Joe Duarte, a Dallas-based independent energy analyst. "The market is clearly in a different zone now, being driven by momentum more than fundamentals."
A survey of analysts carried out by Dow Jones Newswires showed that distillate stocks, which include heating oil and diesel fuel, were expected to build for the 14th consecutive week.
With the summer driving season drawing to an end, market focus is expected to shift to heating oil as demand for this product usually peaks in the winter.
Stoking bullish sentiment, the AccuWeather forecasters said that a new tropical depression formed over the Atlantic and was expected to reach the Gulf of Mexico later this week. Oil companies have shut down facilities in the Gulf as precaution against storm damage.
Part of the present upward trend is rooted in last week's production outages from Ecuador, due to worker unrest and Iraq, where insurgents shut down most of the country's electricity grid on Monday.
Iraqi exports have since begun returning to normal, and the situation in Ecuador also has stabilized even amid building tensions over U.S. religious broadcaster Pat Robertson's suggestion that Venezuelan President Hugo Chavez be assassinated.
Washington has distanced itself from Robertson's comments.
Venezuela is the world's fifth-largest crude exporter and has the largest proven reserves outside of the Middle East. Chavez is an outspoken critic of U.S. President George W. Bush and has irritated U.S. officials with his fiery rhetoric against American "imperialism" while moving closer to Washington's enemies Cuba and Iran.
He had also threatened to block exports to the United States, where most exports go.