Oil's
Devastating Run Continues
By Richard Mably
06 October, 2004
Reuters
Oil
prices extended record-setting highs above $51 for U.S. crude on Wednesday,
fueled by the impact of Hurricane Ivan on U.S. winter inventories.
U.S. light crude
(CLc1: Quote, Profile, Research) hit $51.48 a barrel before easing to
$51.27 a barrel, up 18 cents on the day. London Brent (LCOc1: Quote,
Profile, Research) , the benchmark for European imports, rose 17 cents
to $47.30 a barrel after setting a record $47.60.
"Momentum can't
be denied in this market and so we find ourselves now ... atop $50 perhaps
headed for $60 absent some unforeseen catalyst for a wave of speculative
selling," said Marshall Steeves of brokers Refco.
"With the political
uncertainty of U.S. and Iraqi elections coming up, we doubt this situation
will be reversed in the near future."
Oil has surged more
than 55 percent since the start of the year, driven by the strongest
demand growth in a generation and a thinning cushion of spare production
capacity to cope with supply outages.
The focus of concern
now is the United States. As of Tuesday, damage from mid-September's
Hurricane Ivan had kept closed 453,000 barrels per day from the U.S.
Gulf of Mexico -- equivalent to about half the output of small OPEC
producer Indonesia.
The impact on U.S.
domestic production has now surpassed the cumulative effects of storms
in 2002, the last time the weather seriously affected oil and gas operations,
the U.S. Minerals Management Service said.
With OPEC pumping
near capacity, there is little leeway for any significant or lasting
supply disruption, and the slow pace of output recovery in the U.S.
Gulf has stoked fears of a potential winter supply crunch.
The Organization
of the Petroleum Exporting Countries lifted production last month by
690,000 barrels a day to a 25-year-high of 30.15 million bpd, a Reuters
survey found.
Most of the extra
oil came from Iraq after repairs to pipelines damaged by sabotage attacks.
U.S. inventories of heating fuel are already running some 3.5 percent
below last year and are expected to record another fall in weekly data
out at 1430 GMT on Wednesday.
Analysts expect government data to show distillate stocks, which include
heating oil, to have fallen by 900,000 barrels in the week to October
1. Crude stocks are expected to rise by 2.2 million barrels as a backlog
of imports delayed by Ivan are delivered.
Other major oil
consumers also are holding thin heating oil supplies, with world number
three energy user Japan running a significant deficit against last year,
data from that country's industry group showed on Wednesday.
Iraq, where saboteurs
continue to target oil facilities, and Nigeria remain areas of concern
for supply problems.
Nigerian blue collar
oil union NUPENG threatened to shut down the oil sector on Sunday ahead
of a general strike on Monday unless the government cuts retail fuel
price or engages in dialogue, the Vanguard newspaper reported on Wednesday.
Nigerian oil unions
have called strikes four times this year over rising fuel prices in
the world's seventh largest exporter, but none so far have affected
the country's 2.3 million barrels per day of output.
The strike threat
follows last week's worries about a bid for autonomy by rebel militants
in Nigeria's river Niger delta oil producing region.