Crude oil futures hit more record highs Monday, nearing US$64 a barrel, reflecting market fears over the U.S. embassy closure in Saudi Arabia and concerns that shutdowns of U.S. oil refineries would reduce supply. Posted on 08/08/2005 9:51:17 AM PDT by M. Espinola
Crude oil futures hit more record highs Monday, nearing US$64 a barrel, reflecting market fears over the U.S. embassy closure in Saudi Arabia and concerns that shutdowns of U.S. oil refineries would reduce supply.
Light, sweet crude for September delivery rose to a high of US$63.95 on the New York Mercantile Exchange before falling back a bit to US$63.75, up US$1.44 at midday.
Prices had settled at US$62.31 a barrel on Friday, a record close for crude since Nymex trading began in 1983.
"The market clearly has the jitters," said Deborah White, energy analyst at SG Securities in Paris.
The Nymex rally received a big boost from blistering gains in gasoline futures, which rose to a new front-month record high of US$1.8690 a gallon, up 3.68 cents, in September. The high, which tops gasoline's last record of US$1.8600 a gallon July 8, reflects the worsening refinery-outage situation in the U.S. that has tightened product supply amid scorching demand for fuel.
Nymex heating oil futures for September traded as high as US$1.7900 a gallon, up 5.88 cents, but remained more than 2 cents off their July 7 record high of US$1.8125 a gallon.
"We had a much lower-than-expected build in natural gas supplies in the U.S. last week and this is also adding to general nervousness," White said.
In London, Brent blend crude futures for September rose as much as US$1.63 to a record high of US$62.70 a barrel on the International Petroleum Exchange.
The market was on edge following Sunday's announcement of a security threat against U.S. government buildings in Saudi Arabia, the world's biggest petroleum producing country.
The planned closure Monday and Tuesday of the U.S. Embassy in Riyadh and consulates in Jiddah and Dhahran was "in response to a threat against U.S. government buildings" in the kingdom, the embassy said, adding it would also limit nonofficial travel of its mission personnel.
It urged Americans residing in Saudi Arabia to keep "a high level of vigilance," but did not elaborate on the nature of the threat.
Meanwhile, analysts said U.S. economic figures on Friday showing payrolls expanded by 207,000 in July, the highest reading in five months, continued to boost bullish sentiment in the market.
"The U.S. economy looks healthy and it's safe to infer that the demand for oil and diesel will remain pretty firm and that the price of oil should be helped along as well," said commodities strategist David Thurtell of Commonwealth Bank of Australia in Sydney.
Oil prices rose even though the Organization of Petroleum Exporting Countries said late Friday that it increased oil production by 300,000 barrels a day in the past two weeks, to around 30.4 million barrels daily.
The market appeared to have largely disregarded the move, as concerns over refinery outages continued to weigh on traders' minds in a time when most refiners are running at full tilt.
ConocoPhillips was the latest to suffer a refinery outage. The company reported planned work and unexpected operational upsets at its 145,800-barrel-a-day refinery in Borger, Texas. The plant's sulfur recovery unit was shut Friday, with a restart planned for Wednesday.
Meantime, a fire broke out at a unit of Sunoco Inc.'s 330,000 barrels-a-day Philadelphia refinery over the weekend, the Philadelphia Inquirer reported Sunday, citing a company spokesman.
The outages have affected approximately 3 percent of the refining capacity in the United States, according to Barclays Capital.
At least seven other U.S. refineries have reported problems of one kind or another in the last two weeks.
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I agree. This is getting WAY out of hand.
It's mandatory additional refineries be constructed and the oil companies will need more tax incentives to prod them along.
Come on, the EPA has been going full tilt since the 70's, doesn't explain the price rising every 10 minutes, or so it seems.
Yes. We should have begun this/these initiatives 10 years ago. The libs have prevented these actions. It takes about 7 years from exploration for gas into the tank. Our refining capacity is at the limit. Few people seem to understand the supply chain. Every time we hear people panic and say "drill now," my wife laughs (she worked for Texaco's refining and manufacturing division in Corporate). She remarks that folks who make these statements seem to think that getting petroleum to market is like flipping a light switch.
Well they are one of the reasons.. Plus the taxes.
If you will take a short minute to think, it is we as a nation. Regardless. The RINOcrats in Congress certainly don't seem to want to engage the socialists on the issue and git it done now do they? I did not say YOU personally.
You're thinking in constant dollar terms. It very well may be that when oil hits $100/bbl that $100 has the purchasing power of $70 today meaning these techniques will not be viable.
Some of us over the age of adolescnce remember Carter's era of gov't. regulated product distribution; causing hour long lines at the gas pump. Maybe you could go back to your Game Boy and watch MTV to keep your mind off of these evil times.
BTW, have you ever heard of things like war, depression, Clinton and Carter?
I hope it goes to $100/bbl. Maybe we will start producing our own.
Searching around for info on the difference between what a refinery pays and what the current commodity cost is, I found this site. Hope it helps understand the forces in play.
Usual disclaimers ....
From: WTRG Economics http://www.wtrg.com/prices.htm
. . . . . On March 19, 2003, just as some Venezuelan production was beginning to return, military action commenced in Iraq. Meanwhile, inventories remained low in the U.S. and other OECD countries. With an improving economy U.S. demand was increasing and Asian demand for crude oil was growing at a rapid pace. The loss of production capacity in Iraq and Venezuela combined with increased production to meet growing international demand led to the erosion of excess oil production capacity. In mid 2002, there was over 6 million barrels per day of excess production capacity, but by mid 2003 the excess was below 2 million. During much of 2004 and 2005 the spare capacity to produce oil has been under one million barrels per day. A million barrels per day is not enough spare capacity to cover an interruption of supply from almost any OPEC producer. In a world that consumes over 80 million barrels per day of petroleum products that adds a significant risk premium to crude oil price and is largely responsible for prices in excess of $40 per barrel. . . . .
Funny, how some people think this is crippling, but those of us in the oil exploration industry are not only grateful for steady work, but for pay raises which were virtually nonexistent from 1982 to 1996.
I'm still water skiing at almost 9pm in June here in NC. And I get up at 10am. We're late night folks.
Agree, they are part of the reason, a BIG part, but it doesn't explain this almost daily rise.
>>>"You could be paying $6.70 a gallon in Norway. Gas is still cheap by historical standards. Beglad you live in America" >>>
Norway uses a percentage of what the US uses. Supply and demand, you need less, price goes up. Means squat over what we are paying here.
>>>I think it was the Government meddling (EPA regs) that got us into this mess in the first place.>>>
Well, then we DO need the government to DO something. Get the hell out of it.
Oil is up, I am a geologist, and can (now) afford gasoline. When oil is cheap, my wife and I have a hard time keeping the tank full. (8^D)
Oh well, when you put it that way I feel much better. I'm happy that you're happy. After work today I'll go to the gas pump and make your day just that much brighter!!
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