NEW YORK, 9 October 2004 — Oil prices surpassed $53 a barrel yesterday on lingering concerns about winter fuel supplies in the United States, operational snags in the Gulf of Mexico and petroleum industry strife in Nigeria and Norway.
Light crude for November delivery rose 37 cents to $53.04 per barrel in afternoon trading on the New York Mercantile Exchange. On Thursday, Nymex oil futures settled at a new high of $52.67 per barrel.
The price of Brent crude oil reached a new record high in London yesterday. The price of Brent North Sea crude oil for delivery in November reached a record summit of $49.30 in early deals in London, breaking the previous peak of $49.20 set Thursday. In late afternoon deals the contract was up 20 cents at $49.10. “We still have bullish news,” said Mario Chavez, vice president of energy futures at ABN Amro in New York, pointing to the cessation yesterday of oil-tanker offloadings at the Louisiana Offshore Oil Port due to bad weather.
The Gulf of Mexico has been plagued by disruptions and delays to petroleum output and shipping for weeks because of hurricane season. The slow pace of recovery for oil-production and pipeline companies has raised fears that the country’s supply of heating oil and natural gas will not grow as large as previously expected ahead of the winter fuels season.
As a result, futures prices for heating oil and natural gas have charged higher.
Heating oil for November delivery is about 75 percent more expensive than a year ago, while natural gas for November delivery is roughly 40 percent more costly.
Yesterday, November heating oil futures rose 2.11 cent to $1.45 per gallon on Nymex. Natural gas futures fell 6.5 cents to $7.19 per 1,000 cubic feet. While oil prices are about 70 percent higher than a year ago, they are more than $27 below the peak inflation-adjusted price reached in 1981.
The overriding concern among oil analysts these days is the world’s scarce surplus production capacity, or supply buffer, which is dangerously thin at around 1 percent above the global demand of 82 million barrels daily.
“The fact is the market can’t afford to have too many supply cuts. That’s driving the prices high even though theoretically there is no shortage,” said Victor Shum, an oil analyst for Texas-based energy consulting group Purvin & Gertz in Singapore. There is ample nervousness about potential supply disruptions in Russia, Iraq and beyond.
Among the worries for the market is the potential for further oil worker strikes in Norway, where output could drop by as much as 200,000 barrels per day, Dow Jones Newswires reported.
In Nigeria, a militia in the oil-producing south called yesterday for government forces to free captured fighters and leave the region. The demands came ahead of talks aimed at calming tensions in Africa’s largest petroleum exporter, where rebels have threatened to attack the oil industry and workers at Royal Dutch/Shell Group were scheduled to end a two-day strike.
Also yesterday, Japan’s economy and fiscal policy minister Heizo Takenaka said the record run in oil prices could derail the country’s economic recovery, while Purnomo Yusgiantoro, president of the Organization of Petroleum Exporting Countries, said the oil organization had no immediate plans to raise output any further.
Oil prices which spiked to record highs are expected to fall below $50 a barrel next year on expectations of smooth elections in Iraq, Yusgiantoro said.
“In futures trading in New York, the price for 2005 is trending lower. This is interesting,” Yusgiantoro told reporters on the sidelines of a conference on the resort island of Bali.
