Oil within $1 of record-peak on refinery snags
Reuters | August 5, 2005
By Maryelle Demongeot
Oil climbed on Friday to within $1 of its all-time high as more U.S. refiners suffered unexpected outages that would stymie efforts to meet strong demand growth in the world's biggest consumer.
U.S. light sweet crude was up 27 cents to $61.65 a barrel in Asian trade, having closed 52 cents higher on Thursday, its fifth gain in the past six sessions. Prices were 85 cents below the all-time peak of $62.50.
London Brent crude gained 23 cents to $60.35 a barrel, 91 cents off the record-high of $61.26 struck this week.
"It's no secret that refineries are the problem. There wouldn't be a problem if there was any slack in the system," said Tony Nunan, a manager at Mitsubishi Corp.'s international energy business in Tokyo.
A half-dozen refineries in the United States have been forced into unplanned shutdowns since late July and some have had to delay planned restarts, leaving the market on edge after U.S. gasoline stocks fell a sharp 4 million barrels last week.
Inventories have fallen into the lower half of their seasonal average, while demand is running 1.1 percent stronger than last year with a month left in the summer season.
Supplies of distillates, which include heating oil, rose 1.5 million barrels to stand almost 3 percent higher than a year ago, but even stronger demand growth for these fuels coupled with refinery trip-ups could dent supplies before winter.
"Demand is so high and capacity is so low, we can go from comfortable to uncomfortable inventories within a month," Nunan said.
Sunoco Inc.'s 150,000-barrel-per-day (bpd) refinery in Toledo, Ohio, failed to restart on Thursday, while the restart of Exxon Mobil Corp.'s 245,000-bpd plant in Joliet, Illinois, was expected to be delayed, trading sources said.
They said BP Plc. had delayed the restart of both of its downed fluid catalytic crackers at its Texas City, Texas, refineries.
Additional disruption could come from an unusually active Atlantic hurricane season, which has already produced eight named storms and could culminate in as many as 21 tropical storms and 11 hurricanes, U.S. government weather forecasters have said.
OPEC PUMPS MORE, TO NO AVAIL
Prices have rallied 42 percent this year despite OPEC pumping at its highest rate in more than 25 years, with traders fearing the cartel's thinned cushion of spare capacity may be insufficient to compensate for any unexpected outages.
Total OPEC oil production rose 290,000 bpd to 30.24 million bpd in July, the highest level since December 1979, as Iraq boosted exports and the United Arab Emirates restored output at oilfields after maintenance, a Reuters survey showed on Thursday.
OPEC is due to meet next month to discuss its output policy, where some members favor suspending quotas to allow a production free-for-all, Nigeria's top oil official, Edmund Daukoru said on Thursday.
Most members, aside from Saudi Arabia, are already pumping flat out.
Daukoru said OPEC might decide to keep production quotas unchanged or raise them, but would not cut output.
Asked if OPEC-member Indonesia would agree to higher quotas, oil minister Purnomo Yusgiantoro told reporters:
"The important thing is how to bring prices down. For Indonesia, there is no problem whether OPEC will add to the quotas because we know that OPEC is currently overproducing and that OPEC's decision must be based on a consensus."
Purnomo said oil prices were still high and having an impact on the economy especially Indonesia's. (Additional reporting by Muklis Ali in Jakarta)