LONDON, 8 October 2004 — Oil prices set a new record at $53 a barrel yesterday on concerns over tight winter heating fuel supplies and news that a strike in Nigeria could put some crude exports on hold.
US light crude futures hit a record $53 a barrel, marking a surge of $20 a barrel — more than 60 percent — so far this year, closing up 60 cents at $52.62. London’s Brent crude also struck a record peak at $49.20 a barrel, ending up 91 cents at $48.90.
Prices have rocketed as China’s economic expansion drives the fastest demand growth in a generation, stretching world fuel supplies to the limit and leaving no cushion to cope with supply problems.
Traders are worried over threats to supply from Nigeria, Africa’s biggest producer, which pumps high-quality crude prized for its yield of transportation fuels.
Independent port inspectors SGS said that Royal Dutch/Shell’s Nigeria crude loadings will go “on hold” as a result of a two-day strike by Nigerian oil unions that started yesterday.
“After vessels currently loading at the terminals, other loading will be put on hold,” SGS said. Shell said the strike had yet to hit loadings.
The strike by the NUPENG and PENGASSAN unions was called to protest against Shell management plans. Shell pumps about a million barrels a day of Nigeria’s 2.3 million bpd output.
Supply worries have intensified after mid-September’s Hurricane Ivan, which cut September US crude production to its lowest in any month since 1950 and disrupted operations at refineries along the Gulf Coast.
About 478,000 barrels per day of crude output in the Gulf of Mexico — 28 percent of gulf production — remains shut due to storm damage and industry executives estimate it could take 45 to 90 days to restore supplies from offshore platforms.
The hurricane hit Gulf Coast refineries, where plants were still working at only 89 percent of capacity last week, hindering efforts to build refined product stocks for winter. US government data on Wednesday showed heating oil stocks six percent lower than a year ago. Stocks of heating fuel in major European and Asian importing nations are also below normal for the time of year.
“The tightness of the crude market has transferred itself to products in the States and with winter ahead distillates are beginning to give cause for genuine concern,” said independent energy consultant Geoff Pyne.
US crude this year has averaged $39.52, up from $30.99 last year, which was already the highest in two decades, and a nearly three times 1998 average of $14.66 during the Asian financial crisis.
US Federal Reserve official Thomas Hoenig said Wednesday that he was not unduly worried about the impact of high oil prices on either the US economy or inflation.
“As long as oil prices don’t get significantly higher than they are now, about $50 a barrel, their likely effects should remain relatively modest,” said Hoenig.
Some officials are beginning to admit concern. David Robinson, deputy research director at the International Monetary Fund warned yesterday that tight oil supplies could leave the global economy worryingly vulnerable for years to come.