Oil Prices Higher on Jitters About Panama Pipeline

The price of oil jumped more than 50 cents a barrel Thursday on the possibility that deliveries might be disrupted if Panama closes a pipeline that transports Alaskan crude to refineries in the eastern United States.

Crude oil for delivery in June on the futures market jumped 54 cents to $20.06 a barrel after reaching an early high of $20.25. Alaska North Slope jumped 56 cents to $18.16 a barrel in the cash market where actual barrels are traded.

“There’s always a possibility that (Gen. Manuel Antonio) Noriega could try to shut down the pipeline,” said Nauman Barakat, vice president at Prudential-Bache Securities.

“If there is dislocation, there would be a tight supply, but I think the market is getting ahead of itself,” said Andrew Lebow of ED&F; Man International Futures.

But other oil industry experts said it was unlikely that Panama’s 81-mile Petroterminale pipeline would be closed. “I don’t think there’s much possibility that the line would be shut down,” said Charles Ebinger, an analyst with International Resources Group in Washington.

President Bush said Thursday that the United States will send a brigade-size force to U.S. bases in Panama to augment military forces assigned there.

London shipping brokers said early Thursday that there was no evidence of ship owners or charterers avoiding the Panama Canal.

Industry sources estimate that the pipeline generates revenue of about $100 million a year for the Panamanian government.

Pipeline Fees Frozen

A spokesman for Northville Industries of Long Island, N.Y., operator of the pipeline, said pipeline fees were frozen in an account last year as part of a package of U.S. economic sanctions put in place after Noriega seized power.

A federal judge in Boston froze the pipeline fees in March, 1988, but Northville is permitted to continue paying its Panamanian employees.

President Bush said Thursday that economic sanctions would remain in force.

Louis James, director of energy services for AUS Consultants in Philadelphia, said a Panamanian shutdown of the pipeline might trigger a wave of unrest among workers.

If a shutdown should take place, Ebinger said, crude oil prices could jump an additional $1.

“Assuming the worst, it would be a dramatic market response similar to Prince William Sound,” he said, referring to the March oil spill in Alaska that pushed prices up.

But oil analysts said there are alternatives for moving the oil in the event the pipeline is closed, such as increased traffic through the Panama Canal or chartering very large vessels to ship the oil around South America.

Ann-Louise Hittle, an analyst with Shearson Lehman Hutton Inc., said specially designed tankers holding up to 90,000 tons of oil could travel through the canal and unload on the eastern side of Panama.

Gasoline Prices Jump

She also estimated that there is 2.5 million barrels of storage capacity on each side of the pipeline, which translates into supplies for roughly eight days.

Oil traders said they expected the price of West Texas Intermediate, the main domestic grade, to trade in the range of $19.50 and $20 once the excitement about Panama dies down.

Gasoline prices jumped a hefty 2.56 cents a gallon to 67.28 cents, while heating oil rose 1.20 cents to 48.68 cents a gallon.

Traders said Environmental Protection Agency approval of clean-air regulations that will make refining gasoline more expensive also pushed prices higher.