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Oil prices set new high of $65 per barrel
Brad Foss Associated Press Business Writer
Oil prices zoomed higher Aug. 10, touching a new high of $65 a barrel, with buyers focused on refinery snags and shrinking U.S. inventories of gasoline.
The latest rally — crude futures have risen 14 percent in three weeks — highlights just how nervous the market has become to just about any threat to output.
Light sweet crude for September delivery climbed $1.93 to $65 a barrel on the New York Mercantile Exchange, the highest level since Nymex trading began in 1983, before settling for the day at $64.90, up $1.83.
The heightened sensitivity comes amid strong demand in the United States and China, the world’s top consuming nations, where high prices have only tempered rising fuel consumption slightly.
“People talked about $60 crude slowing economies around the world. But here in the U.S., (Federal Reserve Chairman) Alan Greenspan is telling us the economy is doing great and getting stronger,” said James Cordier, president of Liberty Trading Group in Tampa, Fla. “It bodes well for crude testing the $70 range.” Energy markets jumpy Energy markets have been extremely jumpy about a spate of refinery outages in recent weeks, though analysts and industry officials said refinery snags are not out of the ordinary for this time of year, when plants run hard to meet peak gasoline demand.
“Hiccups are an unfortunate reality of operating refineries,” said Bryan Caviness, who follows the industry for Fitch Ratings in Chicago. “There have not been any more than what you typically see, but the impact (on prices) has certainly been greater than what you’ve seen in years past.”
The transition of power in Saudi Arabia following the death of King Fahd also unnerved markets, as did the security-related closure of the U.S. embassy in the world’s largest oil-producing nation.
While oil prices are about 40 percent higher than a year ago, they would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980.
OPEC has pledged to pump more oil if needed, though the market has tended to brush off such talk. That’s because worldwide demand is averaging some 84 million barrels a day, excess production capacity is limited to about 1.5 million barrels a day and the type of oil available — sour crude — is not the preferred variety for making transportation fuels. U.S. refineries: aging problem? Some traders say a spate of U.S refinery troubles — the latest reported by BP PLC Aug. 10 — is evidence the industry and its aging infrastructure are having difficulty maintaining output at high levels.
Mary Rose Brown, a spokeswoman for San Antonio-based refiner Valero Energy Corp., said she has been getting calls from the financial media about minor production snags that in years past would not have received any attention. “Everybody’s asking, so we tell,” she said.
But Fitch’s Caviness noted that “a side benefit” of refiners’ willingness to talk about even the smallest production glitches is that it makes energy traders jumpy, and tends to push prices — and hence refiners’ profits — higher.
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