Oil prices top US$61 a barrel

The refinery snags caused by Tropical Storm Cindy were minor and temporary and traders said the rally reflected broader fears about the nascent hurricane season and the energy market’s limited supply cushion.

But more menacing Tropical Storm Dennis, on a route that could take it near the Alabama-Florida border over the weekend, lifted oil prices to record highs on both sides of the Atlantic.

On the New York Mercantile Exchange, benchmark light, sweet crude futures for August delivery soared $1.76 to an intraday high of $61.35 a barrel, the highest price for a front month contract since crude futures began trading on the Nymex in 1983. The contract settled at $61.28 a barrel, a gain of $1.69.

On London’s International Petroleum Exchange, benchmark North Sea Brent futures for August delivery rallied as high as $60.00 a barrel, up $1.61, also a new settlement high.

One analyst said he expects a new high at the gasoline pump in the United States within a matter of days. "We’ll probably cross the $2.30 a gallon national level by this time next week," said analyst Tom Kloza of Oil Price Information Service in Wall, New Jersey.

Retail gasoline averages $2.23 a gallon in the US, a nickel below the peak that was set during the week ending April 11, according to the energy department.

Crude oil futures are about 60 percent above year ago levels, though still below the inflation-adjusted high above $90 a barrel reached in 1980.

Petroleum product’s futures also set new record highs yesterday, with gasoline futures leading the way.

Gasoline futures for August delivery jumped 11.17 cents to a record high of $1.7935 a gallon, while heating oil for August delivery climbed to a record high of $1.7980 a gallon, up 6.56 cents.

While the rapidly weakening Cindy moved inland, Tropical Storm Dennis was expected to make its way into the Gulf this weekend and possibly strengthen into a hurricane before then.

The National Hurricane Centre’s lead forecaster dubbed Dennis "a minimal hurricane" late yesterday, contributing to a late-day rally in oil prices.

"The worry is how much more damage would Dennis do if it takes the same path," said Aaron Kildow, a broker with Prudential Financial in New York.

Petroleum producers evacuated 85 production platforms and 11 drilling rigs, according to the Minerals Management Service, which said 190,000 barrels per day of oil had been shut-in as a result. That is less than one percent of daily demand in the United States.

Still, oil broker Tom Bentz at BNP Paribas Commodity Futures in New York said there was no evidence so far of any serious or lasting damage to oil production or refining facilities from Cindy.

What’s propelling energy prices higher, he said, is the underlying fear that a hurricane, a terrorist attack or some other uncontrollable event could stymie oil production and refining at a time when demand is strong and excess output capacity is limited.

Traders remembered last year’s Hurricane Ivan, which forced oil platforms across the Gulf of Mexico to shut down, causing production bottlenecks and sending prices higher as the Northern Hemisphere was gearing up for winter heating oil production.

"Memories are still strong of the severe and lasting damage done along the US Gulf Coast by Hurricane Ivan last autumn, and the fear is that another heavy season of tropical storms will batter this key producing region again this year," said Energyintel analyst Tom Wallin in a research note.

Hurricane Ivan damaged some oil platforms in the Gulf of Mexico and caused others to shut down for months. Almost 44 million barrels of oil production was lost between September 2004 and February 2005, while natural gas output declined over the same period by 172 billion cubic feet.