Oil hits record
New record reached with $50 a barrel in sight as fighting in Nigeria raises new inventory concern.
September 27, 2004: 8:46 AM EDT
By Chris Isidore, CNN/Money senior writer
NEW YORK (CNN/Money) - Oil futures hit a new record Monday morning and appeared ready to cross the $50 a barrel mark, as concerns about inventory levels were compounded by the latest unrest in Nigeria.
U.S. crude futures rose 57 cents to $49.45 a barrel in electronic trading early Monday, according to Reuters. That put it 5 cents above the $49.40 intraday record set last month. Brent oil futures set a record, rising to $46 a barrel before pulling back to $45.80, up 47 cents on the session.
"If we don't hit it ($50) today, we're going to hit it before Wednesday and there's a good chance we'll do it today," said oil analyst Peter Beutel, president of Cameron Hanover. "Basically the supply and demand is still very bullish here. We just don't have any cushion in terms of supply for prices to move anywhere other than higher."
Beutel said he believes the gains in futures early Monday were largely in anticipation of Wednesday's Energy Department report on U.S. oil inventories. The Sept. 22 report showed U.S. crude oil supplies for refineries down 1.3 million barrels a day to 14.7 million barrels per day for the week ended Sept. 17, Much of that decline was blamed on Hurricane Ivan, which hit the U.S. Gulf Coast during that week. Beutel said there is growing concern those inventories will not bounce back as much as previously hoped.
Inventories are not at low enough levels to justify current pricing, said Fadel Gheit, an oil analyst with Oppenheimer. He believes that fear of disruptions and speculation are driving prices higher rather than market fundamentals.
"I would say the fear premium right now is between $15 to $20 a barrel, but it's not likely to come down any time soon," he said. "It is very hard to change perception."
Nigerian rebels battling troops in Africa's top oil exporter declared Sunday they would extend their uprising across the whole of the country's oil-producing southern delta. Oil companies in Nigeria fear a repeat of last year's uprising by members of the Ijaw tribe, which forced them temporarily to shut 40 percent of the country's 2.5 million barrel per day output, according to Reuters.
Royal Dutch/Shell Group has shut between 30,000 to 40,000 barrels a day of Nigerian oil output because of security restrictions in the Niger delta where militants are fighting government troops, a senior industry source told Reuters on Monday.
"If the military operations continue we could see a degeneration," the source told the wire service.
But Beutel and Gheit both say Nigeria has been an unstable country for years and the new problems there are just feeding fears more than reducing exports.
"We all expect unrest in Nigeria. It could be the next big thing, but as far as today, it and Hurricane Ivan just brought all these inventory concerns to the forefront," he said.
There was one piece of good news for oil supplies as Reuters reported Iraq oil exports have reached 2.5 million barrels a day, the highest level since mid-2000, as Iraq reopened oil exports via its main pipeline to Turkey on Monday. The pipeline can carry between 400,000 to 500,000 barrels a day.
The pipeline had been out of action since saboteurs blew it up on Sept 2. The increased Iraq output is still seen at risk due to continued unrest in the country. |
