Skip to comments.Oil surges as Saudi king dies, refiners struggle (Crude now $62 and rising)
Posted on 08/01/2005 10:34:42 AM PDT by Jomini
Oil prices climbed above $61 a barrel to a three-week high on Monday as the death of Saudi Arabia's King Fahd, a spate of U.S. refinery outages and tensions over Iran's nuclear ambitions rattled the market.
U.S. light, sweet crude rose $1.03 to $61.60 a barrel. The price has climbed 40 percent this year and is approaching the record high of $62.10 hit on July 7.
"It's this combination that serves as a reminder of the market's vulnerability," said a senior energy analyst.
King Fahd died on Monday and will be succeeded by Crown Prince Abdullah, his half-brother who has been the de-facto ruler of Saudi Arabia since Fahd suffered a stroke in 1995.
Abdullah will adhere to Saudi Arabia's long-standing oil policy aimed at ensuring global markets are well supplied, the kingdom's next U.S. ambassador Prince Turki al-Faisal said.
But analysts said markets were jittery over longer term Saudi policy, noting that the new king and Crown Prince were both octogenarians.
"It's this succession struggle and the possible related instability that's the actual concern," one trader said.
REFINERIES UNDER STRAIN
A spate of refinery problems in the United States resurrected concerns about meeting strong fuel demand.
Exxon Mobil added to the anxiety at the weekend as it shut down its 235,000 barrels per day Joliet refinery in Illinois, according to trade sources.
BP also shut down a gasoline-producing unit at the weekend at its giant Texas City refinery -- the third-largest in the U.S. and source of 3 percent of its gasoline -- for maintenance, a regulatory filing showed "Steadily declining inventory levels ahead of the gasoline peak demand season mean that this market has been looking increasingly tight," said Barclays Capital in a report.
Although stockpiles of most fuels are relatively healthy for this time of year, traders fear refiners may be hard-pressed to satisfy rising summer motor fuel consumption while also stocking up enough distillate supplies to meet peak winter consumption.
Adding to market nerves, OPEC's second biggest oil producer Iran said it would break U.N. seals on a nuclear plant and resume work that the West suspects could help it build an atom bomb.
The move was in defiance of EU warnings and could see Iran's case sent to the United Nations Security Council for possible sanctions.
The classic Eastern stretch-and-break attack continues as a major terrorist strike will propel crude into the stratosphere. A year from now $62 will look like a bargain.
George W. Carter.
How the HELL do refinery outages raise the price of crude oil? If anything, that means refineries will be buying slightly LESS until the outages are fixed.
There's some serious manipulation going on here...
Seen any gas lines lately ?
Read over the weekend via newspaper that CAFTA will result in US exporting billions in petroleum. Maybe the exporting will be temporarily stopped but I won't hold my breath. The American consumers are being gouged horribly so why in the world does the US oil companies and govt want to export petroleum to the central american nations when it could be used at home. Message to the oil companies and to the govt: charity begins at home.
Yes, they know that, just recently refineries were given millions of our taxpayers dollars by heir Humelund Security to beef up security in the form of overpriced fences & out of dated cameras.
It seems like a bunch of persons on this web site want to nationalize the US oil industry!
This is a joke! All refinery units are bought down for maintainence on two to four year cycles. They can only run about four maybe stretching to nearly five years before they have to be shutdown for repair.
The other joke is reducing stocks of gasoline and motor fuels! Would you not expect the stocks to reduce when you are at peak consuption? That is how the refining business operates EVERY year. They build gasoline, diesel and AV / jet fuel inventory in the spring and sell it down in the summer. In the fall they build stockpiles of fuel oils, propane and kero for winter demand and sell it down in the winter to make room for the spring build up of you guessed it! Motor fuels!
It has been a repeating cycle for the 25 years I've worked in refineries...
So, what's the odds on this Abdullah guy? 81? Couldn't walk without Dubya holding his hand......
One thing about high oil prices; it replenishes the Saudi treasury.....helping them and their vital interests....
That's what determines our fleet average MPG, nothing else.
Like mother planning the family meals, nothing left over, nothing to waste.
The car companies dial in the MPG at mothers beckoning.
I don't know why King Faud's death would cause the price of oil to rise. If they plant him, he'll turn into oil eventually, thereby increasing the total supply and reducing the price, right? Well, yeah, granted it'll take a few hundred centuries...
Like a rat waiting at the cheese bar, any excuse to pull the lever to up the price will do.
"Seen any gas lines lately ?"
Yes. We had a gas shortage down here. Hard to find gas and if a station had gas, the lines were long. Dennis cut off our supplies. Last week stations started to get gas again.
The commodities speculators will use any excuse to bid up oil prices. If I were the President, I'd announce this week that we are in war time and will start rationing gas to x-number of gallons per driver starting Sept. 1. It would be so simple to do with computers keeping a tally on your driver's license number. Talk about a market crash! I'd be delighted to have played a part in the war on terror by putting the Saudis and the oil speculators out of business.
Econ 101 my friend. given constant demand for finished product a refinery shut down lowers supply thus prices rise.
The point is, gasoline is plentiful and available, unlike when Jimmah Cahtah was in charge.
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