Oil at $62 on worries over world supplies ($62.03/bbl)

Reuters ^ | August 3, 2005 | Yaw Yan Chong

[RWR8189]

SINGAPORE (Reuters) - Oil rose above $62 a barrel on Wednesday, just shy of its record high, as expectations of tight U.S. supplies and disruptions added to concern over the long-term stability of Saudi Arabia after the death of King Fahd.

U.S. light sweet crude for September delivery was up 16 cents at $62.05 a barrel in Asian trade, within striking distance of the all-time peak of $62.30 set on Monday, after hitting a high of $62.08.

London Brent crude was at $60.83 a barrel, up 21 cents from Tuesday and also near its record high of $60.98.

The firmer tone was underpinned by concern about Atlantic hurricanes. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, U.S. government forecasters said.

"There seems to be some concern over an unusually active U.S. hurricane season that has already seen seven named storms in June and July, well ahead of when the season is supposed to start in August," said Commonwealth Bank of Australia's David Thurtell.

"But I think the concern over the Saudi political situation is a little bit overdone really. It's something that should settle rather quickly. After all, there's no real immediate political change."

The reins of Saudi Arabia, the world's top oil producer, have been passed on to King Abdullah, ensuring a continuation of the kingdom's oil policy and close alliance with the West.

Even so, analysts see him as a transitional ruler and say there are question marks over future successions in the leading member of the OPEC cartel, which may not go as smoothly.

The kingdom is pumping about 9.5 million barrels per day (bpd) of crude and has vowed to keep spare production capacity of 1.5 million to 2.0 million bpd to meet any supply shortfalls.

SHORT SUPPLY

The market was also propped up by a series of U.S. refinery problems and expectations that a government report would show a fifth straight weekly draw in crude supplies, along with low stocks of gasoline.

A Reuters survey of 14 analysts predicted that gasoline stocks would fall 900,000 barrels during the peak demand season, casting a pall over higher refining production and imports.

U.S. gasoline demand is some 2.4 percent higher than a year ago. Car manufacturer General Motors Corp. said sales of gas-guzzling SUVs were at an all-time high in July.

Crude oil stocks are expected to have fallen a modest 1.6 million barrels in the week ended July 29, though those surveyed expected inventories to rebound, while distillates stocks are seen rising 1.9 million barrels.

The spate of refinery problems in the U.S. Gulf Coast continued, with Motiva Enterprises LLC, a joint venture between Royal Dutch Shell and Saudi Aramco, shutting a crude unit at its Norco, Louisiana, refinery for repairs.

Exxon Mobil Corp. shut down its 235,000-bpd refinery in Joliet, Illinois, on Saturday night due to a failure in its cooling water system, while BP Plc. shut a gasoline-producing unit over the weekend at its giant Texas City refinery after a fire.

[RWR8189]

8/2/2005 Session Contract Detail for Sep 2005

	Last				62.03
	Open High				0.00
	Open Low				0.00
	High				62.19
	Low				61.80
	Settle				0.00
	Change				+.14
	Open Interest				0.00
	Volume				0.00
	Last Updated				8/3/2005 05:00:35

 

[newzjunkey]

It isn't up because of worries. It's up entirely because of greed and opportunism using the death of Saudi figurehead King Fahd. The sooner we move to gas/electic hybrid, biodiesel and hydrogen fuel cell technologies, the better off our nation and national security will be.

[RWR8189]

You say greed and opportunism, I say capitalism.

There has been a lot of money to make at the NYMEX over the last few years, you should have been along for the ride.

[sgtbono2002]

Its a new excuse every day, Fahd dying is just the latest. Fact is we are bent over, our pants are down and they are ramming it home.

[liberallarry]

The article doesn't make any sense to me.

Refinery problems should lead to a rise in the price of refined products, not crude. King Fahd has been virtually dead since '96. Why should his actual death mean anything?

On the other hand, we already know that demand is growing faster than supply, so why take so many paragraphs to say it?

[maestro]

Britain had better start 'hardening' their refineries and secure their CONTROL of international British-oil-tea-tax-monopoly on oil refineries?

.....we are paying high gas prices to pay their 'insurance' for THEM?

impossible.....

/sarcasm

Colonies to return,.....OFF 'nation-building'....ON, 'colony building'....

'gas colonies'?

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

[M. Espinola]

"You say greed and opportunism, I say capitalism."

Those saying it's all greed are not really familiar with the refinery shortfall problem on an international level coupled with the fire situation causing shut downs. Adding to the problems are the multi-mixtures of reformulated unleaded, state by state plus also based on which portion of a given state. In addition, this hurricane season has been forecasted to be possibly even worse then last years, having the a potential of adversely effecting Gulf of Mexico offshore oil rigs as well as oil storage depots and and refineries. This vicious hurricane cycle could last for 15 years or more.

U.S. & world-wide oil refineries

In terms of Saudi Arabia, the Wahhabist 'prince' now 'officially' running the show, has been for the last 10 years. In addition to the continuing threat from homegrown jihadists turning on their master, it should not be ruled out.

The slightly longer view on the Kingdom of Wahhabism is jihad promoting & nuclear Iran is a wild card for the entire oil producing Persian Gulf, whenever the inevitable corrective actions gets underway of the mullahs drive to gain offensive nuclear weapons.

Also on looking toward this coming winter and heating oil stocks coupled with natural gas usage if it's a real rough winter for the Northeast, like last winter.

"There has been a lot of money to make at the NYMEX over the last few years, you should have been along for the ride."

These guys making the oil market complaints can pick up a few energy options or futures just like anyone else. Sure the energy funds can push up and drag down prices to an extent, resulting from the fund's large volume of open interest, however think back to the mid to late Autumn of 2003, not that long ago crude was hovering right around the $30 a barrel figure and now within a year & a half she doubled to over $60. Same bullish scenario took place across the board for the entire energy complex. Heating oil prices are very high for this time of year.

NYMEX 10 year crude chart

In terms of major OPEC or non-OPEC oil exporters demonstrating supply difficulties, with the exception of ongoing acts of terrorist sabotage attacks on Iraq's oil infrastructure, (already factored into market trending), no other principal oil producing exporter is having their supplies threatened (as of this second!) since ubrupt jolts can manifest overnight in such unstable oil states as Nigeria (a cleaner grade of crude oil) and Venezuela, to name just two in OPEC that supply U.S.

The quote "Greed is good" is wrong, it should be "Volatility is good" :)

[RayChuang88]

It's up entirely because of greed and opportunism using the death of Saudi figurehead King Fahd.

Given that his anointed successor was pretty much the true ruler of Saudi Arabia since King Fahd's major stroke about a decade ago, this should have no effect on the price of oil. What will affect the price of oil is the prediction of a strong hurricane season, which would interfere with the oil production platforms in the Gulf of Mexico.

[JoeSixPack1]

Tipping my hat to the global economic impact of $3.00 a gallon gas,,,,

Gatorade is now $3.98 a gallon whereas Hawaiin Punch is still under $3 a gallon.

I have no idea what it all means, but $2 for a 16oz bottle of beer is insane!

:-)

Burp

[biblewonk]

--snip-- U.S. gasoline demand is some 2.4 percent higher than a year ago. Car manufacturer General Motors Corp. said sales of gas-guzzling SUVs were at an all-time high in July.

What!? That sure isn't what we were hearing 2 months ago.

[biblewonk]

Another good day for a bike ride.

[newgeezer]

What!? That sure isn't what we were hearing 2 months ago.

I suspect it has something to do with that "employee pricing for everyone" promotion they ran through the month. $8K can compensate for a lot of the missing MPG, if one is so inclined.

[TheBattman]

Exactly the "speculators" are simply doing everything they can to ramp up their profits. There is no legitimate reason for the "worries" - but if you can scare these folks, they will pay big bucks for oil futures.

[newgeezer]

The price of gas here in Cedar Rapids, Iowa, jumped 20 cents overnight.

I don't think it's ever jumped more than 20 cents in one fell swoop.

Sam's Club is perhaps the only station still at $1.99 this morning. That won't last long. So, I got over there quickly and saved enough on the fill up to eat lunch for a week.

[wrathof59]

Speculators are using any world event, natural or not, to drive up the futures on oil and stuff their greedy little paws with more money.

Absent any government intervention, the only recourse for the consumer is use less. Most Americans, sadly, will never tolerate any interruption of their comfy lifestyle. I feel for the truckers, they'll bear the brunt for some rich, greedy futures' trader in NYC.

[HockeyPop]

DJ OIL FUTURES: NY Crude Dn On Surprise Oil-Stock Boost-EIA ....as of 10:50am

[HockeyPop]

That's ES Time

[painter]

I'm curious.Does anyone know what the world wide demand for oil as in millions of barrels per day say 3yrs ago and what it is today?I mean for the price of oil to more than double there has to be a reason for it.Speculators are using ANY excuse to run the price up.

[RightWhale]

It is amusing how some analysts attribute the price of oil to the state of mind of the investors. Feelings. The conspiracy idea is more solid.

The Alaska Natural Gas Pipeline is slowly moving toward starting building. There will be a built-in lag of a couple of years from time the contract is signed and actual construction begins. When the pipe is purchased it will be a couple more years until construction begins. It may be as much as ten years until the first gas flows beginning with the pipe purchase. The pipe will probably come from Asia since the American steel industry isn't competitive, as a guess. As long as the gas price stays above $2.50, the gas pipeline should be profitable, but that number keeps sliding upward. Control and responsibility for negotiation rests with the Gov of Alaska. The Alaska Port Authority is one of three parties in the negotiation and weaker than the consortium.

[TheBattman]

And THAT is the point. Oil consumption is NOT double what it was 1 or even 3 or 5 years ago. There is an increase in demand - but oil is flowing reasonably unempeded (other than a paranoid fool in South America). Despite the terrorists continued actions in Iraq, the oil is flowing better than it has in years. Yes, the Russian oil company Yukos is still an issue.... but it's all still, as a whole, MORE stable than a year or two ago.

The prices are currently being driven by profit-motivated speculators who will spawn whatever rumor or story it takes to bump their prices. If Wall Street traders were allowed the same freedom as the oil speculators, holy cow.....! But the US government is smart enough to have regulations to try to prevent such speculative lying and scare tactics to increase profits. Folks have spent time in prison for what the oil speculators are doing....