Oil Prices Pass $61 on Saudi King's Death
Associate Press | August 1, 2005
By GILLIAN WONG
SINGAPORE (AP) - Crude oil prices soared past $61 a barrel to two-week highs as news broke that the ruler of the world's largest oil exporter, Saudi Arabia, died Monday.
Minutes after the news of the Saudi Arabian king's death broke out in Singapore, light, sweet crude for September delivery spiked 60 cents to reach $61.11 a barrel, its highest in more than two weeks. It is currently at $61.07 a barrel, up 31 cents.
Prices were also supported by Iran's threat on Sunday to restart its nuclear enrichment program, sparking fears that tension between Tehran and Western nations could disrupt oil supplies from OPEC's second's largest exporter.
Oil futures hit an intraday record of $62.10 a barrel on July 7. Prices are around 40 percent higher than year-ago levels but would need to reach $90 to reach the all-time inflated adjusted high set in 1980.
Saudi Arabia's ruler, King Fahd, 84, died early Monday in a Riyadh hospital and his brother, Crown Prince Abdullah, was appointed the country's new monarch, the Saudi royal court announced in a statement.
Abdullah is unlikely to change oil export policy, but the news of the king's death immediately unsettled markets.
King Fahd brought the kingdom, holder of the world's largest oil reserves and home to Islam's holiest shrines, closer to the United States during more than two decades as monarch.
Heating oil was up by a penny and a half to at $1.6915 a gallon (3.8 liters) while gasoline gained a cent at $1.7404 a gallon.
September Brent futures at London's International Petroleum Exchange opened 48 cents up at $59.85 a barrel, before slipping to $59.60.
Elsewhere in the Middle East, Iran on Sunday threatened to restart uranium reprocessing work if negotiators from Britain, France and Germany do not immediately offer a promised package of incentives to entice Tehran to freeze its nuclear program.
Traders were concerned continued tensions between Iran and the European governments could push the hardline government to suspend oil exports - of 4 million barrels daily - to get what it wants. The EU had been expected to present the incentive package to Iran by the start of August, but had requested a delay until Aug. 7.
"If supply from Iran is suspended because of geopolitical developments, it will be a severe threat to the world's oil supply," said senior commodities strategist Tetsu Emori of Mitsui Bussan Futures in Tokyo, Japan. "It's not a small issue."
Analysts believe the world's excess capacity is limited, which means producer nations are not likely to meet demand if supply is disrupted from geopolitical tensions or other unplanned outages, such as weather-linked shutdowns.
Strikes, terrorism-related problems, oil disputes in Russia, Venezuela, Nigeria, Saudi Arabia and Iran helped push prices upward all of last year.
Tehran halted uranium enrichment in November under international pressure led by the United States, which suspects the country's nuclear program is aimed at making weapons. Iran maintains its program is peaceful.
Meanwhile, traders continued to watch for news of the impact on production caused by fires at two U.S. refineries last Thursday. BP has said gasoline output at its Texas City plant was cut by 35,000 barrels a day.
"There's uncertainty how long BP's Texas refinery would be shut, or how bad it is affecting U.S. gasoline supply during the summer driving season," said Ken Hasegawa of Tokyo-based brokerage firm Himawari CX.
Investigators said the blast at the Texas City refinery, which processes 433,000 barrels of crude oil a day, was caused by a pipeline failure. It is the third largest refinery in the country.
BP also shut the 120,000 barrel-a-day oil field in the North Sea, though the damage caused by the blast was expected to be minimal.