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Oil Rises for a Second Day as Mexico Shuts Fields on Hurricane

Oil Rises for a Second Day as Mexico Shuts Fields on Hurricane

July 18 (Bloomberg) -- Crude oil rose for a second day after Mexico shut offshore fields, where three-quarters of the country's 3.4 million barrels a day of oil is pumped, as Hurricane Emily approached the country's Yucatan Peninsula.

State-owned oil company Petroleos Mexicanos yesterday halted output in the Campeche Sound because of Emily, the second hurricane in the Atlantic Ocean this season. Mexico was the largest oil supplier to the U.S. after Canada last year and accounted for about 16 percent of the nation's imports, according to the U.S. Department of Energy.

``They are barrels the world really can't do without at the moment given the tightness of the market,'' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia.

Crude oil for August delivery rose as much as 82 cents, or 1.4 percent, to $58.91 a barrel in after-hours trading on the New York Mercantile Exchange at 3:14 p.m. Singapore time. On July 15, the August contract climbed 29 cents, or 0.5 percent, to $58.09 a barrel. Prices today are 41 percent higher than a year ago.

Oil futures reached a record $62.10 a barrel on July 7 as Hurricane Dennis approached the Gulf of Mexico. The storm, which struck the western Florida coast July 10, prompted the temporary shut-down of 96 percent of the region's oil production. Total output lost was 5 million barrels, the U.S. Minerals Management Service said last week.

Tight Supply

``The market is very worried about these weather-related disruptions,'' Commonwealth's Thurtell said. ``We've had some very strong hurricanes early in the season. The chances are, we're going to get a few more and chances are one of them will make some significant damage.''

Emily, a Category 4 hurricane with sustained winds near 135 miles per hour, is forecast to cross Mexico's Yucatan Peninsula later today and may reach the coast of Mexico, south of Brownsville, Texas by July 20, the U.S. National Hurricane Center said on its Web site.

``Little overall change in strength is expected before landfall,'' the center said in a statement at 8 p.m. New York time. ``Weakening will occur as the center of Emily crosses the Yucatan Peninsula.''

Intensity of hurricanes is measured on the five-level Saffir- Simpson scale, with Category 5 being the strongest.

Heating Oil

Heating oil futures on July 15 rose as much as 2.5 percent on concern Emily may disrupt refineries in Corpus Christi, Texas and drilling rigs and platforms off the state's coast. The Corpus Christi area is home to at least three refineries with combined crude processing capacity of 586,000 barrels a day, according to U.S. Energy Department data.

Heating oil for August delivery rose 1.39 cent, or 0.8 percent, to $1.6760 a gallon on the New York Mercantile Exchange at 9:52 a.m. in Singapore.

``The very active hurricane season may disrupt infrastructure in the Gulf of Mexico and the market will continue to price in this possibility,'' said Dariusz Kowalczyk, a senior investment strategist in Hong Kong at CFC Securities Ltd. ``Next week's U.S. commercial inventory report will show another big drawdown of crude stockpiles as much of the disruption in imports and output from Hurricane Dennis has not yet been reflected.''

The Energy Department is scheduled to release its weekly report on petroleum inventories on July 13 at 10:30 a.m. in Washington.

Crude oil may fall this week as rising inventories of heating oil and diesel ease concern that U.S. fuel supply will fail to meet demand in the fourth quarter, a Bloomberg survey showed on July 15.

Twenty-one of 59 analysts and strategists surveyed by Bloomberg, or 36 percent, forecast oil prices will decline next week. Eighteen, or 31 percent, said they will rise and 20 predicted little change. Oil has fallen 5.7 percent in New York from a record $62.10 a barrel on July 7.

Iraq

Ibrahim Bahr al-Ulum, Iraq's oil minister, said today a one- day strike which started yesterday didn't cut exports, because the protest was ``peaceful'' as workers complained about delays in the trial of former Iraqi President Saddam Hussein.

Iraq suspended oil exports through its terminals at 8 a.m. yesterday because of the strike, Agence France-Presse reported, citing an unidentified official at the state-run South Oil Co., which manages production and exports from the southern half of the country.

A suspension in Iraqi oil exports, which are equivalent to about 1.6 percent of world demand for crude, could push international oil prices higher as most OPEC members are pumping at full capacity to meet surging demand in China, India and other growing economies.

To contact the reporters on this story:
Sri Jegarajah in Singapore at [e-mail];
Gavin Evans in Wellington, New Zealand at [e-mail].


LINK: http://www.bloomberg.com/apps/news?pid=10000103&refer=news_index&sid=a.D1tjFfC..0