Oil Rises on U.S. Gulf Supply Disruption, Tropical Storm Emily
Bloomberg | July 13, 2005
Oil prices rose for a second day as Tropical Storm Emily headed for the Gulf of Mexico, which has had half its oil production shut down after Hurricane Dennis slammed into the area last week.
Production in the Gulf was 43 percent of normal at noon New York time yesterday, compared with 4 percent the previous day, according to the U.S. Minerals Management Service. Tropical Storm Emily may reach the Gulf next week, threatening fields that account for 30 percent of U.S. output.
``The early hurricane season does have many looking in the South Atlantic and Caribbean for the next storm to form,'' said Alan Herbst, a principal at New York-based consulting firm Utilis Energy LLC. ``The emergence of such storms will support prices due to the lack of supply cushion in the market,''.
Crude oil for August delivery rose as much as 33 cents, or 0.5 percent, to $60.95 in after-hours electronic trading on the New York Mercantile Exchange, and traded at $60.97 a barrel at 1:46 p.m. Singapore time.
Yesterday, oil gained $1.70 to $60.62 a barrel. Futures touched $62.10 a barrel on July 7, the highest since trading began in 1983, on concern Dennis might disrupt production for an extended period.
The National Hurricane Center issued a hurricane warning for Emily for Barbados, Grenada, the Grenadines, St. Vincent and St. Lucia. The warning means hurricane conditions are expected within 24 hours, the Miami-based center said in an advisory on its Web site dated 8 p.m. yesterday local time.
Emily is moving westward at about 20 miles an hour and is expected to turn toward the west-north-west in the next 24 hours, the center said.
At noon New York time yesterday, oil production in the Gulf was down 857,975 barrels a day, or 57 percent, compared with 1.44 million barrels, or 96 percent, the previous day, according to the Minerals Management Service Web site.
``Now there are worries about this tropical storm Emily, they're getting all these big storms really quite early in the season,'' said David Thurtell, commodity strategist at Commonwealth Bank of Australia. ``If you get these continued disruptions then second-half production is going to disappoint.''
Dennis and an earlier storm Cindy were the fourth and third named storms of the June 1-Nov. 30 Atlantic hurricane season. They cut a swathe through the Caribbean and Gulf of Mexico in the past two weeks, killing at least 20 people in Cuba and Haiti, forcing evacuations from homes and oil facilities and causing damage that storm modelers say may cost insurers billions of dollars.
``The shut-ins from Cindy and Dennis will have implications on both the crude and the oil-products inventories,'' said Marshall Steeves, an analyst with Refco Inc. in New York.
Oil is up 54 percent from a year ago with U.S. gasoline demand at its annual peak because of increased driving during the holiday period.
Refiners last week operated their plants at the highest rate in more than six years to keep pace with demand.
A weekly U.S. Energy Department report later today may show refinery utilization was at 97 percent of capacity in the week ended July 8, down 1.1 percentage point from the week before, according to the median of 11 analysts surveyed by Bloomberg. Last week's utilization rate of 98.1 percent was the highest in more than six years.
The U.S. Energy Department report will probably show stockpiles of crude oil fell by 2.8 million barrels, according to the median of estimates. Gasoline inventories may also have dropped.
Gasoline inventories probably fell 1 million barrels last week, the Energy Department report will probably show. The department will publish its weekly inventory report at 10:30 a.m. Washington time.
Crude oil prices have more than doubled in three years as soaring demand in China and U.S. reduced spare capacity in most oil-producing nations, increasing concern about potential shortages in the event of disruptions.