Crude oil is doing great
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Oil Jumps on Iraq, Hurricane Worries
Tuesday October 1, 2:33 pm ET
By Andrew Mitchell
NEW YORK (Reuters) - World oil prices rose toward 19-month highs on Tuesday as the threat of severe storm disruption to Gulf of Mexico oil and gas operations preyed on a market already nervous over potential conflict in Iraq.
Even news that Iraq agreed on Tuesday to a resumption of U.N. weapons inspections, with an advance team of inspectors due in about two weeks, failed to bring prices down far from their peaks.
New York crude futures for November (CLX2) delivery jumped 39 cents to $30.84 a barrel, while London benchmark Brent crude futures for November (LCOX2) stood 27 cents higher at $29.02 a barrel
U.S. prices earlier hit $31.18, within 25 cents of their highest level since February 2001 as Gulf producers were forced to airlift crews and start shutting in production for the second time in two weeks as Hurricane Lili bore down on the oil-rich Gulf of Mexico.
Shell Oil Co., the biggest Gulf producer, and other oil producers and port operators said on Tuesday they will shut in activities as early as the day's end due to forecasts of strong winds and powerful waves from Hurricane Lili. Lili is currently packing winds of 85 miles per hour and is expected to reach the oil-production areas of the Gulf of Mexico late Wednesday or early Thursday.
STOCKS EBBING
Gulf oil and gas operations are still recovering from last week's Tropical Storm Isidore, which forced oil firms to cut roughly 1.4 million barrels per day (bpd) of the Gulf's 1.5 million bpd oil production capacity.
New supply figures from the American Petroleum Institute due to be reported after the close of trade on Tuesday are expected to show a big decrease in crude stocks -- already at their lowest level in 19 months -- ahead of the key winter season -- due to Isidore.
"It is hard to be bearish on oil ahead of a possible mammoth U.S. stock draw, another hurricane in the Gulf of Mexico and with the United States appearing to make progress in persuading U.N. Security Council members to support its position for a tough resolution against Iraq," said GNI Research analyst Lawrence Eagles.
Oil prices are up more than 40 percent over the year, spurring fears that steeper energy costs for consumers and businesses could thwart the economy's move out of recession.
IRAQ TALKS
Talks in Vienna between U.N. weapons inspectors and Iraqi arms experts aimed at warding off a full-scale military attack led by the United States ended with agreement on the logistics of resuming the inspections under U.N. Security Council rules.
The talks in Vienna were the first test of Iraq's willingness to cooperate since Baghdad agreed on Sept. 16 to the unconditional return of the inspectors.
The deal emerged from two days of talks at the United Nations in Vienna aimed at returning inspectors to Baghdad for the first time since 1998 in an attempt to prevent a threatened military strike by the United States and Britain.
The United States has intensified lobbying of U.N. Security Council members in support of a resolution that allows Washington to strike Iraq if it perceives violations of the agreement.
Dealers fear conflict in the Middle East could disrupt supplies from a region that pumps a third of the world's oil and holds almost all its spare production capacity.
"Today doesn't change much. You're dealing with Iraq and that makes everybody skeptical," said Tom Bentz of BNP Paribas bank.
U.S. Energy Secretary Spencer Abraham said on Tuesday that despite oil's current strength, the Bush administration will not release crude oil from the nation's Strategic Petroleum Reserve in order to lower prices.
Abraham said the United States would use the reserves only if there was a "major supply disruption."
OPEC SIGNALS
The OPEC oil cartel's decision last month to hold production quotas at the lowest level in a decade has helped run U.S. inventories down despite sluggish fuel demand in a shaky global economy.
Indonesian Oil Minister Purnomo Yusgiantoro said on Tuesday that leading OPEC member Saudi Arabia was prepared to raise output if the price of an OPEC basket of crudes stayed over $28 a barrel for 20 days.
A price stability formula devised by OPEC two years ago allows for the group to lift output by 500,000 barrels a day if prices stray above its $22-$28 a barrel target range for 20 days.
Saudi Arabia is OPEC's biggest and most influential producer and would need to back any action for an increase to be implemented.
The basket of seven crudes was priced at $28.34 a barrel on Monday, the sixth consecutive day above the top end of the range. |
