IDCN - Oil prices above $70 on hurricane forecast
This is on the front page of the Indocan website.
Tuesday 23 May 2006, 10:46pm EST
SYDNEY, May 23 (Reuters) - Oil futures surged above $70 on Tuesday as commodities staged a modest recovery from last week's sell-off, Venezuela mooted OPEC oil production cuts and the U.S. government predicted another rough Atlantic hurricane season.
U.S. crude for July delivery rose 34 cents to $70.30 a barrel by 0242 GMT. The June contract expired on Monday, rising 70 cents to $69.23, having earlier touched six-week lows as inflation-spooked investors exited a range of commodity classes.
London July Brent crude was up 35 cents at $69.70.
"Predictions for a strong hurricane season have been around for a while, but there are some firm numbers and probabilities attached now," said Andrew Harrington, resources analyst at ANZ in Sydney. "If they come to pass it looks like a rough season, which could impact output still recovering from last year."
The U.S. National Oceanic and Atmospheric Administration said 2006 could see up to 10 hurricanes, a dark cloud over the Gulf of Mexico, which last year saw offshore platforms toppled, undersea pipelines ruptured and several coastal refineries flooded.
About 20 percent of the Gulf's 1.5 million barrels per day of crude oil output has been shut since the record 2005 storm season along with 13 percent of the region's 10 bcfd of natural gas production, which saw crude above $70 for the first time.
"We've also had the Venezuelans talking up oil prices and a calmer day for metal prices," said ANZ's Harrington. "Commodity losses last week probably just represents volatility. To say we've seen a real correction would be overstating it."
Precious and industrial metals steadied on Monday after a volatile week, which had also wiped nearly 5 percent off oil, as investors worried record raw material prices would mean stronger inflation, higher interest rates and reduced demand.
Meanwhile Venezuelan Oil Minister Rafael Ramirez said healthy global crude stockpiles would justify a reduction in full-throttle output limits when the Organization of the Petroleum Exporting Countries meets in Caracas next week.
Venezuela, the world's number-five oil exporter, has vocally advocated a hawkish OPEC policy, despite soaring energy prices. But other OPEC members have said the cartel is unlikely to change output levels next week with crude prices still close to records.
Rising U.S. gasoline inventories could provide some relief from high prices, with a Reuters poll of analysts predicting a fourth consecutive weekly jump -- by an average 1.4 million barrels -- when government data is released on Wednesday.
Refineries are cranking up production ahead of the Memorial Day holiday weekend on May 29, the traditional launch of the U.S. summer gasoline season when drivers take to the roads for holidays.
