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Oil Prices Surge Back Above $60 a Barrel

Oil Prices Surge Back Above $60 a Barrel
By EDITH BALAZS
Tuesday, July 12, 2005 11:05 AM PDT

Crude futures briefly jumped more than $2 a barrel Tuesday after the Energy Department raised its oil-price forecast by $6 a barrel and as traders remain worried that summer storms in the Gulf of Mexico could curtail petroleum output.

The Energy Department, which oversees U.S. supply and demand statistics, said Tuesday that it expects oil prices to average $59 a barrel through September, up from its estimate of $53 a barrel a month ago.

While the impact of Hurricane Dennis was not as bad as originally feared _ even with BP reporting that one of its offshore platforms was listing _ traders are keeping an eye on freshly brewing Tropical Storm Emily.

Adding to bullish sentiment were expectations that Wednesday's inventory snapshot from the U.S. government would show a decline in crude oil inventories.

"People seem to have taken the consistent view that the U.S. statistics are always bullish and markets respond accordingly every week," said Julian Lee, energy analyst with the London-based Center for Global Energy Studies.

After briefly surging past $61 a barrel, light sweet crude for August delivery traded at $60.70 a barrel, an increase of $1.78 on the New York Mercantile Exchange.

Heating oil futures soared 6.92 cents to $1.751 a gallon, while gasoline futures rose 4.79 cents to $1.78 a gallon.

Hurricane Dennis swept through the Caribbean and the Gulf of Mexico last week, but failed to do the kind of damage to oil and gas platforms that Ivan did nearly a year ago. Still, BP PLC said late Monday that its Thunder Horse offshore platform, which was not expected to be producing any oil or gas until later this year, is listing at about 20-30 degrees in the deepwater. Exxon Mobil Corp. is a partner on the Thunder Horse project.

Many oil production facilities had shut down prior to Dennis' arrival, briefly shutting in production of oil and natural gas. The U.S. federal Minerals Management Service said that more than 4 million barrels of oil and 18 billion cubic feet of natural gas were shut in between Friday and Monday. That's less than 1 percent of the region's annual output.

While there was scant indication Dennis disrupted any Gulf refinery operations last weekend, a handful of power outages from Dennis' predecessor, Tropical Storm Cindy, continued to dog refineries in Louisiana and Mississippi.

"As of now it looks like his (Dennis') path was east of pipelines and refineries and we can breathe a sigh of relief," said Phil Flynn, analyst with Chicago-based Alaron Futures and Options in his daily research note. "Still, we have to be on guard somewhat because as we learned from Hurricane Ivan that sometimes the damage from the storm isn't always immediately apparent."

Early Tuesday, a tropical depression developed into Tropical Storm Emily in the Atlantic Ocean, the fifth named storm for this point in the still-young hurricane season. The storm picked up speed and is expected to strengthen as it heads toward the Caribbean.

Meanwhile, the Organization of Petroleum Exporting Countries said it was again ready to do its best to lower prices by releasing additional barrels. Earlier OPEC pledges were shrugged off by the market.

The official Kuwait News Agency quoted cartel spokesman Abdul Rahman Al-Khareiji as saying Monday it was prepared to add 500,000 barrels to help rein in prices, now 50 percent higher from a year ago.

"If prices continue to bounce around current levels, I believe there is sufficient will among OPEC members to have a quota increase in place soon," Lee said. "Should we see prices retreat in the coming days however, all that talk about output increase will evaporate."

Associated Press Writers Brad Foss in Washington and En-Lai Yeoh in Singapore contributed to this report.

A service of the Associated Press(AP)


LINK: http://www.nctimes.com/articles/2005/07/12/ap/business/d8ba04e00.txt