Oil prices surpass US$52 a barrel

WASHINGTON: Crude futures surged above US$52 a barrel yesterday as a possible strike by Nigerian oil workers loomed and petroleum output in the Gulf of Mexico continued to suffer more than two weeks after Hurricane Ivan whipped through the region. An Energy Department report that showed domestic oil supplies grew for the second week in a row provided little comfort to traders, who instead focused on declining heating oil inventories. The federal agency warned in a separate report yesterday that homeowners should expect their heating bills to rise this winter due to double-digit price increases for heating oil and natural gas. Light crude for November delivery rose 93 cents to $52.02 a barrel on the New York Mercantile Exchange, a record settlement high. In London, November Brent crude futures were up 86 cents at $47.99 per barrel on the International Petroleum Exchange. While oil prices are 64 percent higher than a year ago, when adjusted for inflation, they remain about $28 below the peak reached in 1981.

Still, the runup has been a boon to the stock prices of oil companies. Shares of Exxon Mobil Corp, the largest integrated petroleum company, are up 30 percent stock price of Anadarko Petroleum Corp, an independent oil and natural gas producer, is up 60 percent from a year ago at $69.04, rising 92 cents yesterday on the NYSE. Feeding oil’s rise yesterday, Nigeria’s main oil workers’ union said it would join a national strike, set to begin next week, unless the government agreed to talks on rising fuel prices. Nigeria, which produces more than 2 million barrels of crude daily, is the world’s seventh-largest oil exporter. Hours later, the Energy Department reported that commercially available inventories of crude grew by 1.1 million barrels to 274 million barrels. That follows an increase of 3.4 million barrels in the prior week, but still leaves inventories four percent below year-ago levels, a shortfall that has traders worried as global supplies remain tight and colder months approach.

“Unfortunately, the build in supplies doesn’t appear to be enough to break the back of $50 oil,” said John Kilduff, senior oil analyst at Fimat USA in New York. Moreover, the country’s supply of distillate fuel, which includes heating oil, diesel and jet fuel, shrank by 2.1 million barrels last week to 123.4 million barrels, according to the government report. That’s six percent below year-ago levels and comes as the United States and the rest of the Northern Hemisphere prepare for winter, when demand rises for home heating fuels such as natural gas and heating oil, a crude derivative. Heating oil is priced more than 70 percent above year-ago levels, with November futures trading at $1.4170 per gallon yesterday, up 1.02 cent on Nymex. Natural gas is 42 percent more expensive than last year, with November futures trading at $6.970 per 1,000 cubic feet, down 19.4 cents.
The retail price of gasoline has also remained stubbornly high, averaging $1.94 per gallon.

The tension underlying oil markets in recent weeks has been pinned on longer-than-expected production snags in the Gulf of Mexico, where oil companies are still regrouping in the wake of Hurricane Ivan. Crude production in the region is still 478,000 barrels per day below normal and oil output is down by more than 16 million barrels since September 13, the federal Minerals Management Service said yesterday. More than 70 billion cubic feet of natural gas output has been lost in the same period, and daily output remains 1.8 billion cubic feet below normal, the agency said. A major worry among analysts in the United States and abroad is the world’s limited excess oil-production capacity, or supply buffer, which is hovering around one percent above robust global consumption of 82 million barrels per day. As a result, fears of supply disruptions in Russia, Venezuela and Nigeria have pushed prices higher for several months. Sporadic attacks against oil pipelines in Iraq have also caused oil prices to jump.