Crude Oil Rises to Record Close of $48.88 as Ivan Cuts Supplies Sept. 24 (Bloomberg) -- Crude oil rose to a record closing price of $48.88 a barrel on concern that the damage caused by Hurricane Ivan will cause stockpiles to be insufficient as refineries boost production of heating oil.
U.S. Gulf of Mexico oil output remained 28 percent below normal levels today, according to the Minerals Management Service, part of the U.S. Interior Department. Ivan hit the area responsible for a quarter of U.S. oil production a week ago. The Louisiana Offshore Oil Port was closed for a day this week because of the return of the storm.
``We're up on a combination of Ivan and concern that another hurricane or two could further interrupt production in the Gulf,'' said George Gaspar, an energy analyst with Robert W. Baird & Co. in Milwaukee. ``The U.S. can't stand another loss of this size. The concern is that supplies will run short as refineries concentrate on making heating oil for the winter.''
Crude oil for November delivery rose 42 cents or 0.9 percent on the New York Mercantile Exchange. The settlement price of $48.88 was the highest since futures began trading in 1983. Prices touched $49 yesterday, the highest intraday price since reaching a record $49.40 on Aug. 20. Oil was up 73 percent from a year earlier. The November contract jumped 7.2 percent this week.
In London, the November Brent crude-oil futures contract rose 20 cents, or 0.4 percent, to $45.33 a barrel on the International Petroleum Exchange, the highest since the contract began trading in 1988. Brent was up 6.8 percent for the week.
Strategic Petroleum Reserve
The U.S. will loan crude oil to refiners from the U.S. Strategic Petroleum Reserve to make up for supply disruptions caused by the hurricane.
A unit of Royal Dutch/Shell Group, Houston-based Shell Trading Co. U.S., completed an agreement with the U.S. Energy Department today for 1.4 million barrels from the reserve. Placid Refining Co. LLC in Port Allen, Louisiana, will get 300,000 barrels, an Energy Department spokesman said.
``The paucity of the loan has the market concerned,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``In the longer term refiners will need further deliveries if they are going to have sufficient oil on hand.''
The department last released oil from the reserve in October 2002 after Hurricane Lili, when it loaned 296,000 barrels to a unit of Royal Dutch/Shell to help with disruptions to pipeline shipments.
U.S. crude-oil stockpiles fell 9.1 million barrels to 269.5 million in the week ended Sept. 17, the Energy Department said. Inventories are 5.8 million barrels from being the lowest since September 1975. It was the first time since 1988 that supplies had dropped for eight straight weeks. Refineries ran at 88.1 percent of capacity last week, a 7.6 percentage point decline.
`Huge Drop'
``There was a huge drop in refinery runs last week,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. ``Refineries will not reopen right away; instead they will use the time to perform maintenance. This should also help crude oil stocks rise.''
After Hurricane Lili in 2002 U.S. stockpiles soared 20 million barrels, or 7.4 percent, in four weeks as a backlog of imports arrived at ports on the Gulf of Mexico.
Crude oil in New York may rise to $50 a barrel next week as U.S. refineries increase purchases to refill inventories that are close to a 29-year low, according to a Bloomberg News survey of traders and analysts. Twenty-four of 41 respondents, or 59 percent, predicted an increase in futures. Fourteen forecast a decline and three said prices would be little changed.
``It looks like we're entering a phase that will take the price to unbelievable highs,'' said Chuck Hackett, a broker and analyst at Access Futures & Options Trading, a commodity futures brokerage in Woodlake, California.
Oil Forecast
Citigroup Inc., the world's largest bank, raised its forecasts for the price of crude oil. West Texas Intermediate, the benchmark U.S. oil price, will average $41, $36 and $28, respectively in 2004, 2005 and 2006, compared with earlier forecasts of $36, $28 and $24.
The bank raised its 2004 Brent crude oil forecast to $38 a barrel from $33, according to the report by analysts Doug Leggate, Jonathan Wright and Tony Eccles at Citigroup's Smith Barney brokerage unit. The 2005 Brent forecast was raised by 27 percent to $33 from $26 and the 2006 price to $26 from $22.50.
STU Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
