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Home >> Business
UPDATED: 09:03, August 18, 2005
Roundup: Refinery outages push crude prices to record high
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Crude oil prices, driven by concerns over refinery failures, hit record highs at least four times last week.

On Friday, oil futures touched 67.10 US dollars per barrel in New York while on London's International Petroleum Exchange, the September Brent crude oil futures contract rose to 66.77 dollars per barrel.

On Monday, prices began to retreat from all-time highs but gave no sign that they would go back to the range of 45-50 dollars a barrel as many analysts had expected early this year.

Concerns over the refinery failures were a major driving force behind the surging oil prices, at least for the past week.

About 14 disruptions had been reported at US refineries since July 20, heightening fears that fuel supplies, especially gasoline, would be insufficient. While US refineries were operating at 95 percent of capacity last week as they tried to meet gasoline needs, which were heaviest in summer, brokers remained concerned about the supply and speculated that increased fuel demand might outpace production.

Exxon Mobil Corp., BP Plc, and ConocoPhillips Corp., the world's largest refining companies, all shut their refinery units due to power failures or maintenance, at a time when gasoline demand soared and as more Americans drove for their summer vocations.

As oil prices soared, speculators became more actively involved in the markets. Hedge-fund managers and other large speculators more than doubled their net-long position in New York Mercantile Exchange oil futures in the week ended August 2, according to US Commodity Futures Trading Commission data.

A long position was a bet that prices would rise. Pushed by

speculators, oil futures contract for December delivery even rose above 68 dollars a barrel last week as energy market became dominated by bullish sentiment.

Meanwhile, supply-demand imbalances still overshadowed most brokers. There were profound supply-demand imbalances in the world and there was no sign of these imbalances being corrected anytime soon, according to some senior analysts.

The International Energy Agency said global fuel consumption might rise by 2 percent, or 1.6 million barrels a day this year.

It also lowered its 2005 non-OPEC supply forecasts by about 200,000 barrels a day, putting more of the burden on OPEC's stretched production capacity to meet rising demand.

In these circumstances, brokers became more concerned about possible supply disruptions in the Middle East, particularly in Saudi Arabia, Iran and Iraq, where political situations remained fragile.

Currently, analysts are talking about 70 dollars, even 75 dollars a barrel in the coming weeks. But many analysts remained divided about short-term trends.

Some said the market had the capacity to hit 70 dollars a barrel by the end of the year, simply because nothing could keep prices from going to that level. But some others were very bearish about oil futures, saying oil prices would slowly came down to 45 dollars a barrel in the next six months.

"It is not a true imbalance but fear about an imbalance developing," said Ken Goldstein, a senior economist at the Conference Board.

There should be a trend for prices to stabilize or fall as fundamentals were giving signs that supplies were matching or even exceeding demand.

When people talked about short-term trends, it was important to keep these facts in minds: while US crude and gasoline inventories declined sharply during the summer driving season, the supply of distillate, a category that included heating oil and diesel, had risen for 12 straight weeks and remained above last year's level.

As the driving season comes to an end at early September, brokers would shift their attention to heating oil, which was relatively rich in stocks. And profit-taking would also weigh on oil prices, especially after the market had undergone a 10-day strong rally.

The US Federal Reserve said most American firms were still able to absorb the negative impact of rising energy costs. However, a latest report from the Labor Department showed that American retailers were facing more pressure as higher energy prices were eating into their shoppers' spending.

Source: Xinhua


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