LONDON, 28 July 2004 — Oil prices climbed in late trading here yesterday, overcoming a subdued start as speculators entered the market over concerns about supply disruption in Russia caused by the crisis engulfing energy giant Yukos, analysts said.
The price of benchmark Brent North Sea crude oil for delivery in September rose 53 cents to $38.64 per barrel in late deals in London.
New York’s reference contract, light sweet crude for September delivery, climbed 48 cents to $41.92 per barrel in early trading. Commerzbank analyst David Thomas said the rise appeared to be the result of technical buying as speculators tested the $42 level in New York. He added that the market was worried that Russian energy giant Yukos, in the midst of a financial crisis, would be forced to cut back its daily output of 1.7 million barrels from mid-August when its money runs out.
“Supply disruptions remain in the front of people’s minds,” Thomas said.
Traders were worried also about the risk of supply disruptions in Germany.
Germany’s Miro refinery, the country’s biggest, faces several weeks of repair work after a fire Friday caused output of gasoline to drop by 25 percent, analysts said Monday.
“The market remains spooked by reports of refinery outages and little spare crude production capacity worldwide but it is currently lacking the momentum to break $39 a barrel on Brent, although an upside trend remains,” analysts at the Sucden brokerage firm told clients.
The market was meanwhile gearing up for weekly estimates of US oil inventories from the US Department of Energy and the private American Petroleum Institute due today.
The OPEC reference basket of seven crude oils rose 6 cents Monday from Friday to a fresh 8-week high of $37.02 a barrel, OPEC’s official news agency Opecna said yesterday.
This is its highest level since June 1 when it hit $37.64 a barrel.
OPEC’s basket price has been above its preferred target band of $22-$28 a barrlel since Dec. 2 but the group has chosen not to use its automatic mechanism of upping output in order to bring the price back into the range, attributing high oil prices to geopolitics and speculation on oil futures markets.
The group raised its production quota by 2 million barrels a day on July 1, with another 500,000 bpd to come on Aug. 1.
Previously the group aimed to keep the basket price within a $22-$28 a barrel range by raising output by 500,000 barrels a day if the basket price held above $28 a barrel for 20 consecutive trading days, or lowering output by 500,000 bpd if the basket price went below $22 a barrel for 10 consecutive trading days. Set in 1986, OPEC’s basket price is based on the average prices of Algerian Saharan Blend, Indonesian Minas, Nigerian Bonny Light, Saudi Arabian Arab Light, Dubai Fateh, Venezuelan Tia Juana Light and Mexican Isthmus.