Oil hits record $68 on storm, gas draw
Reuters | August 25, 2005
LONDON - Oil surged to a record $68 a barrel on Thursday, hounded by supply concerns due to a growing threat to oil facilities from an Atlantic storm and a large fall in U.S. gasoline stocks.
U.S. light crude was up three cents at $67.35 a barrel by 0958 GMT, pausing after hitting $68 in early trade, the highest since U.S. crude futures started trade in 1983. London Brent crude was up 12 cents to $66.13.
Dealers are concerned about a thin stock cushion after a rash of disruptions and tensions in oil-producing countries cut crude output and propelled prices to a series of record peaks.
Gasoline stockpiles in the United States, the world's top oil consumer, beat forecasts to register a slide of 3.2 million barrels in the week to August 19, widening the supply gap from a year ago, the government Energy Administration Agency said.
Stocks of the auto fuel have contracted for eight straight weeks, led by higher demand as the peak driving season has almost two weeks to run its course.
Compounding the fears, a tropical storm is swirling toward Florida, threatening U.S. oil and gas production facilities in the Gulf of Mexico.
"The market is really starting to get unhinged," said John Brady at ABN AMRO in New York. "The majority can be attributed to the storm, and some geopolitical concerns as well."
Tropical storm Katrina, which formed in the Bahamas on Wednesday, was moving on a path that would likely cut across southern Florida and into the Gulf of Mexico later this week, the U.S. National Hurricane Center said.
The storm was expected to hit the Miami area by Friday as a weak hurricane moving slowly across the state into the Gulf.
Market participants fear the storm may threaten oil and gas producing areas in the central and eastern Gulf of Mexico, where the United States derives between 20 and 25 percent of domestic crude and natural gas production.
The unusually active Atlantic hurricane season has produced 11 named storms and could culminate in as many as 21 tropical storms and 11 hurricanes, forecasters have said.
SUPPLY WOES LINGER
Refinery snags have also skewed risks to the upside as the oil industry struggles to keep pace with demand growth, which has thus far proven remarkably resilient amid soaring costs.
"There is very strong demand and we don't see that demand receding," the International Monetary Fund's chief Rodrigo Rato. said in a teleconference on Thursday. "Prices are not going back to the levels seen at the beginning of 2004."
Adding to the list was Shell Oil Co.'s 153,000 barrel-per-day (bpd) refinery in Martinez, California, which suffered a malfunction in a production unit on Tuesday.
Tesoro Corp. said a 70,000-bpd gasoline-producing unit at its 168,000-bpd Golden Eagle refinery in Martinez, California, was shut on Wednesday following a fire.
And Huntsman Corp. declared a force majeure on Wednesday on a large part of its production of methyl tertiary butyl ether (MTBE), a gasoline octane-booster, from its refinery in Port Neches, Texas. Trade sources said the force majeure would last for 45 days.
Output in Ecuador, which mostly supplies crude to California, is still down to around 80 percent of its 530,000-bpd level after attacks on oil infrastructure last week.
Protesters, who have choked off oil exports, are threatening a hunger strike to pressure the government on their demands, dealing a blow to settlement talks.
The market also watched for disruption in Nigeria, where some fuel stations shut down ahead of an expected 60 percent hike in fuel prices. Previous government attempts to raise prices have led to crippling general strikes in the world's 8th largest oil exporter.