Oil jumps as storm menaces Gulf of Mexico By Jonathan Leff Reuters Monday, October 17, 2005; 2:00 AM
SINGAPORE (Reuters) - Oil prices leapt $1 on Monday as a new storm forming in the Caribbean threatened to plow into Gulf of Mexico oil platforms for a third time this year.
Rising tensions in Iran, the world's fourth-biggest oil producer, also buoyed prices after twin bombings in the southwest oil city of Ahvaz, which Tehran blamed on Britain.
U.S. crude <CLc1> climbed $1.07 a barrel, or 1.7 percent, to $63.70 in electronic trading. London Brent crude <LCOc1> was up 98 cents to $60.46 a barrel.
Oil gained 79 cents last week when prices hit a 10-week low of $60.35 on signs high prices were cutting into consumption.
Concerns about waning demand were eclipsed on Monday by Tropical Depression 24, located 155 miles southeast of Grand Cayman, which the U.S. National Hurricane Center said could strengthen into a named storm later in the day and move into the southeastern Gulf of Mexico by the end of this week.
But it also warned that directional currents were weak and "erratic motion" was possible in the coming days.
"The market is nervous about a new storm, while supplies are tight and oil facilities have not fully recovered (from the last hurricanes)," said Naohiro Niimura, vice president of the derivatives business at Mizuho Corporate Bank in Tokyo.
Hurricanes Katrina and Rita tore through the Gulf and into the coast in August and September, sharply curtailing oil and gas production as well as refinery operations.
As of Friday, some 67 percent of U.S. oil production from the region remained shut while nearly 10 percent of U.S. refining capacity, or 1.63 million barrels per day (bpd), was also idle, keeping traders on edge over tightening oil product supplies.
A new named storm would be this year's 21st, tying a record from 1933 with a month and a half still left in the Atlantic basin hurricane season.
IRAN WORRIES
Geopolitical anxiety moved up a notch in OPEC-member Iran, where five people were killed and more than 80 wounded when homemade bombs detonated in garbage bins on Saturday.
"We are very suspicious about the role of British forces in perpetrating such terrorist acts," the ISNA student news agency quoted Iranian President Mahmoud Ahmadinejad as saying.
Britain, which has more than 8,000 troops across the border in southern Iraq, has denied any link with the bombs or with a string of attacks this year in Khuzestan province, the center of Iran's oil industry. But the incident has increased tensions.
Oil traders have been on tenterhooks over Iran since the summer as Tehran's persistent pursuit of its controversial nuclear program puts it at odds with the United States, but analysts said Washington might be reluctant to press the issue.
ECONOMY WORRY
Dealers are watchful for signs that record energy costs are beginning to eat into economic growth or fuelling inflation, factors that could undermine the market's demand-driven rally.
Fears that oil consumption growth may stall amid high prices have helped knock U.S. crude down from its $70.85 a barrel record-high at the end of August, although prices are still up 47 percent since January and double what they were two years ago.
Meeting in China, the G20 group of rich and developing nations said they feared "long-lasting and volatile" prices could spur inflation, slow growth and create economic instability, although some officials said the dangers were contained for now.
Jean-Claude Trichet, president of the European Central Bank, said the ECB had not seen any signs of the dangerous spillover of higher energy costs into demands for wage rises.
U.S. consumer prices shot up an unexpectedly large 1.2 percent last month, the biggest rise in more than a quarter century, sending oil prices tumbling on Friday.
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