Friday, November 19, 2004
Oil prices soar as supply worries emerge again
The Associated Press
Crude oil futures prices soared to near $49 a barrel Friday as concerns about tight winter fuel supplies were stoked by a refinery outage in Venezuela and speculation that rising oil inventories could prompt OPEC to scale back output.
The growing quantity of crude reaching U.S. shores has helped to push oil prices 12% lower since late October despite stubbornly low level of distillate fuel, which includes heating oil, diesel and jet fuel.
But traders are beginning to wonder if the Organization of Petroleum Exporting Countries, worried about potentially oversupplying the market, might consider informally trimming production at its next meeting in December.
"If not announce a production cut, OPEC could pull back a bit from the all-out production that we're seeing right now," said John Kilduff, senior analyst at Fimat USA Inc. in New York.
Representatives for Iran and Venezuela have suggested such a cut may be necessary to prevent prices from plummeting.
Societe Generale Paris-based economist Deborah White said OPEC production cuts "are both imminent and inevitable, and the market will be feeling their effects by January, if not earlier."
"Let us hope," she added, "that OPEC does not cut too deeply, because that would mean losing a valuable opportunity to let this over-heated market cool down."
There was plenty of heat in the market on Friday.
Light, sweet crude for December delivery was up $2.68 to $48.90 a barrel in afternoon trade on the New York Mercantile Exchange.
Nymex crude futures are about $6 cheaper than the peak closing price of $55.17 set twice in late October. Oil prices would have to surpass $90 a barrel to meet the inflation-adjusted peak set in 1980.
Robert W. Baird oil analyst George Gaspar said there is currently no "glut" of oil on the market, despite what bullish energy traders might say. Gaspar added that OPEC may not need to pump as much oil beginning early next year if world demand growth slows as expected.
"It's too soon to make that assessment," Gaspar said. "After all, they have consistently said that oil prices are too high."
The more immediate concern, Gaspar said, is the tight supply of heating oil.
Indeed, heating oil futures climbed for the third straight day on Friday, rising 4 cents to $1.47 per gallon, as traders continued to fret supply data released Wednesday by the Energy Department. The agency reported that the nation's supply of distillate fuel had fallen for the ninth consecutive week, leaving inventories at 114.6 million barrels, or 14% below year ago levels.
With supplies tight and prices high, the Energy Department has warned homeowners that use heating oil to expect to pay 37% more for fuel this winter. Natural gas customers should expect to say 15% more to heat their homes, the agency said.
The report of a refinery outage in Venezuela served as a further catalyst for the market on Friday, sending gasoline futures up 6.5 cents to $1.3035 per gallon.
Dow Jones reported Friday that the Curacao Isla refinery, owned by Venezuela's state oil company Petroleos de Venezuela, shut down completely Thursday morning due to a power failure and still remains inactive.
Also on Friday, Russia moved ahead Friday with plans to break up Yukos, announcing it would auction off a majority stake in its main production unit. The bidding in the Dec. 19 auction will start at $8.6 billion — lower than even the most conservative independent valuation.
The Associated Press
Crude oil futures prices soared to near $49 a barrel Friday as concerns about tight winter fuel supplies were stoked by a refinery outage in Venezuela and speculation that rising oil inventories could prompt OPEC to scale back output.
The growing quantity of crude reaching U.S. shores has helped to push oil prices 12% lower since late October despite stubbornly low level of distillate fuel, which includes heating oil, diesel and jet fuel.
But traders are beginning to wonder if the Organization of Petroleum Exporting Countries, worried about potentially oversupplying the market, might consider informally trimming production at its next meeting in December.
"If not announce a production cut, OPEC could pull back a bit from the all-out production that we're seeing right now," said John Kilduff, senior analyst at Fimat USA Inc. in New York.
Representatives for Iran and Venezuela have suggested such a cut may be necessary to prevent prices from plummeting.
Societe Generale Paris-based economist Deborah White said OPEC production cuts "are both imminent and inevitable, and the market will be feeling their effects by January, if not earlier."
"Let us hope," she added, "that OPEC does not cut too deeply, because that would mean losing a valuable opportunity to let this over-heated market cool down."
There was plenty of heat in the market on Friday.
Light, sweet crude for December delivery was up $2.68 to $48.90 a barrel in afternoon trade on the New York Mercantile Exchange.
Nymex crude futures are about $6 cheaper than the peak closing price of $55.17 set twice in late October. Oil prices would have to surpass $90 a barrel to meet the inflation-adjusted peak set in 1980.
Robert W. Baird oil analyst George Gaspar said there is currently no "glut" of oil on the market, despite what bullish energy traders might say. Gaspar added that OPEC may not need to pump as much oil beginning early next year if world demand growth slows as expected.
"It's too soon to make that assessment," Gaspar said. "After all, they have consistently said that oil prices are too high."
The more immediate concern, Gaspar said, is the tight supply of heating oil.
Indeed, heating oil futures climbed for the third straight day on Friday, rising 4 cents to $1.47 per gallon, as traders continued to fret supply data released Wednesday by the Energy Department. The agency reported that the nation's supply of distillate fuel had fallen for the ninth consecutive week, leaving inventories at 114.6 million barrels, or 14% below year ago levels.
With supplies tight and prices high, the Energy Department has warned homeowners that use heating oil to expect to pay 37% more for fuel this winter. Natural gas customers should expect to say 15% more to heat their homes, the agency said.
The report of a refinery outage in Venezuela served as a further catalyst for the market on Friday, sending gasoline futures up 6.5 cents to $1.3035 per gallon.
Dow Jones reported Friday that the Curacao Isla refinery, owned by Venezuela's state oil company Petroleos de Venezuela, shut down completely Thursday morning due to a power failure and still remains inactive.
Also on Friday, Russia moved ahead Friday with plans to break up Yukos, announcing it would auction off a majority stake in its main production unit. The bidding in the Dec. 19 auction will start at $8.6 billion — lower than even the most conservative independent valuation.
