Disruptions Lift Oil to New High
Persistent fears of oil shortages -- abetted by Hurricane Ivan’s disruption of supplies from the Gulf of Mexico -- lifted oil prices to a new closing high of almost $49 a barrel Friday, keeping upward pressure on gasoline pump prices.
The benchmark light crude for current delivery climbed 42 cents to $48.88 a barrel on the New York Mercantile Exchange, its highest settlement in the 21 years that the futures contract has traded on the Nymex.
Oil’s previous closing record was $48.70 set Aug. 19, and the next day oil hit an intraday high of $49.40 a barrel.
Prices have soared 50% this year and are up 73% from a year ago.
Adjusted for inflation, however, prices remain below peak levels reached in the early 1980s.
With oil demand rising and supplies constrained, prices have rallied amid concerns that production could be disrupted by terrorism or political instability in key oil-exporting nations, especially in the Middle East. Heavy speculation by institutional investors also has helped prices surge.
Hurricane Ivan added to those concerns when it swept into the Gulf of Mexico last week, shutting down oil production, refining and imports along the Gulf Coast.
On Friday, the Minerals Management Service, an arm of the Interior Department, said oil production in the Gulf of Mexico was still down 28% because of Ivan. The news gave oil prices a late boost on the Nymex.
“That was the same percentage as the day before, and it suggested that the recovery of lost offshore production in the gulf is going to be a slow process,” said Marshall Steeves, an analyst at commodities brokerage Refco Inc. in New York.
Although California doesn’t depend on Gulf Coast oil for its gasoline, motorists are unlikely to see substantial relief at the pump with oil prices again climbing toward $50 a barrel, analysts said.
The average price for self-serve regular in California was $2.106 a gallon Friday, up from $2.10 on Thursday, according to AAA. A year ago, the price was $2.012 a gallon. One potential benefit for motorists: With the summer driving season over, gasoline demand should ebb and help offset the higher price of oil, analysts said.
Gasoline for current delivery on the Nymex -- a rough gauge of gasoline’s wholesale price before distribution costs, taxes and dealer profits -- edged up 0.5 cent to $1.3482 a gallon, its highest price since early June.
The Bush administration said Thursday that it would release a “limited quantity” of crude from the U.S. Strategic Petroleum Reserve to help refiners that were short of crude. But analysts noted that releases would be relatively small, and said they were unlikely to curb prices much.
The Energy Department said it agreed to lend 1.4 million barrels of crude from the strategic reserve to two Shell Oil Co. refineries on the Gulf Coast, and an additional 300,000 barrels to Placid Refining Co. in Louisiana. The oil is to be paid back once supply problems abate.
Other such deals are under negotiation, the agency said, and analysts anticipate that probably no more than 4 million barrels would be made available.
Democratic presidential candidate Sen. John F. Kerry and others have contended that the United States should stop buying oil for the reserve until prices retreat.
The reserve, in salt caverns along the Gulf Coast, has about 670 million barrels, and about 100,000 barrels are being added daily.
Some observers also have suggested that by releasing part of the reserve’s oil, it could reduce the speculation now pushing prices higher. But the Bush administration has adamantly opposed the idea, saying it won’t use the reserve to manipulate market prices.
Times wire services were used in compiling this report.
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Near-term crude oil futures in New York, per barrel, daily closes
Source: Bloomberg News