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Oil prices up on supply, hurricane worries Temporary Nymex spike sets new record Aug. 3; prices moderate to $61-range on better-than-expected inventory report from DOE The Associated Press
Oil prices rose Aug. 4 as traders remained wary over possible supply woes because of refinery shutdowns and forecasters predicted a busy hurricane season that could hurt Gulf of Mexico output.
Light, sweet crude for September delivery rose 24 cents to $61.10 a barrel on the New York Mercantile Exchange.
“Years of underinvestment in the refinery sector have led to a very tightly supplied market, which in return pushed prices to current levels,” said Alex Scott, a senior research analyst at Seven Investment Management in London.
“Direct market participants seem to believe that prices are to stay at current levels for years to come and the fact that there’s very little evidence to show a slowdown in global demand is broadly supportive of their bullish argument,” Scott said.
Prices had soared to a record intraday high of $62.50 Aug. 3 before retreating to settle at $60.86 after the U.S. Department of Energy released its better-than-expected petroleum report, showing an increase in oil inventories for the first time in a month.
The data showed domestic inventories of crude oil and diesel grew, but gasoline stocks fell sharply.
It said there was an increase of 200,000 barrels in the U.S. inventory of crude oil the last week in July, putting the supply at 318 million barrels, or 8 percent above year-ago levels. Gasoline inventories declined by 4 million barrels to 205.2 million barrels, or 3 percent below last year’s level. The supply of distillate fuel, which includes heating oil and diesel, rose by 1.5 million barrels to 127.3 million barrels or 5 percent above last year.
Brent for September delivery on London’s International Petroleum Exchange rose 41 cents to $60.06. Refinery activity a concern Production suspensions at several key U.S. plants was the catalyst for a price spike at the end of July as analysts said the snags could hurt oil products supply and fail to meet demand in an extremely tight market. At least four plants, including the third-largest refinery in the country, were shut down from late the week of July 25 either from fires or unscheduled maintenance.
Aging refineries in the United States are running at nearly 100 percent utilization, and this increases the likelihood of operational problems as companies begin to slow down production of gasoline for summer and turn to heating oil for winter.
“Gasoline markets have been hit with a rash of unplanned refinery outages in the last couple of weeks,” said Energyintel analyst Tom Wallin. “Even with U.S. retail pump prices at record highs, the economy continues to surge ahead and with it gasoline consumption. The extreme price strength clearly seems to be demand-led.”
Oil markets have been roiled in recent days over the death of King Fahd in Saudi Arabia, weather patterns that could hurt Gulf of Mexico output down the line and Iran’s nuclear ambitions, which could raise tension between OPEC’s No. 2 producer and the West.
The U.S. Weather Service has predicted 11 to 14 more tropical storms, including seven to nine more hurricanes, by the end of November.
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