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London attack causes oil price drop Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aNU_1SRyYV_0&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aNU_1SRyYV_0&refer=home
Oil Falls a Second Day After London Attack, U.S. Supply Gain
July 8 (Bloomberg) -- Crude oil fell for a second day after the attack in London yesterday raised concern terrorism will deter travel, slowing jet-fuel sales, and after a report showed U.S. supplies distillate rose more than expected.
Prices in New York fell from a record $62.10 yesterday, in the biggest price swing in 14 years, to close down 0.9 percent after bombings in London killed at least 37 and injured 700. U.S. supplies of distillates, which include heating oil and diesel, rose for the seventh week, the Energy Department said.
``The bombings may have an impact on the U.K. and European economies, which would limit demand.'' said Doug Leggate, senior oil analyst at Citigroup Inc. in New York.
Crude oil for August delivery fell as much as 54 cents today to $60.19 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $60.44 at 10:04 a.m. Singapore time.
The contract yesterday fell 55 cents to $60.73. Oil prices today are 50 percent higher than a year ago. Oil plunged $4.90 from yesterday's record to $57.20 a barrel in the two hours after the London bombing. The slide was the biggest intraday price swing since the Persian Gulf War in 1991.
When there's concern about a possible terrorist attack, ``it's blind panic,'' said Bruce Evers, an oil analyst at Investec Securities in London. ``People just don't think rationally. It's a knee-jerk reaction after the quite big jump in prices we've had in the past few days.''
Sept. 11
Oil jumped more than $1 in the days after the Sept. 11, 2001, terrorist attacks on New York and Washington before falling for the rest of the year as travel and the economy slowed. Prices have more than tripled since late 2001. Crude oil rose on the day of the Madrid bomb attacks on March 11, 2004.
``It will have a small effect on fuel demand, as part of the transport sector,'' said Gene Pisasale, an energy analyst at Wilmington Trust in Wilmington, Delaware. ``This is not near the scope of Sept. 11, which had a major effect on crude.''
Oil futures had gained 8.3 percent in three sessions before the London bombing as oil companies in the Gulf of Mexico evacuated staff from production platforms and rigs in advance of Tropical Storm Cindy and then Hurricane Dennis, now 135 miles (215 kilometers) southwest of Guantanamo, Cuba.
Dennis, a category 3 hurricane on the five-tier Saffir- Simpson scale, has sustained windspeeds of 130 miles an hour, the U.S. National Hurricane Center said yesterday.
Tracking Dennis
``Dennis could become a Category 4 hurricane before reaching Cuba'', the center said.
On its present course, Dennis would strike the Alabama and west Florida coast July 10. Some computer models suggest the hurricane may shift further east, away from the major oil producing areas, the center said.
``The track of Dennis is going to be the focus for the next few days,'' said Mike Armbruster, co-founder of Altavest Worldwide Trading Inc. in Languna Hills, California. ``This is a strong bull market. If we get more bad weather there's no way of knowing what's going to happen in terms of price.''
States along the Gulf coast receive more than half of U.S. oil imports and are home to 50 percent of the nation's refining capacity. The region also is the source of 30 percent of U.S. oil production, according to the Minerals Management Service.
Oil prices have gained 15 percent the past month on concern U.S. refiners would strain to meet summer gasoline demand and store sufficient heating fuel for northern hemisphere winter.
Refining
U.S. distillate stockpiles, which include, diesel and heating oil, rose 4.1 million barrels to 117.2 million in the week ended July 1, the department reported yesterday. An increase of 1.5 million barrels was expected, according to the median of forecasts by 16 analysts surveyed by Bloomberg. Heating oil supplies jumped 6.1 percent, the biggest weekly gain since July 2003.
``The price has clearly driven too high in the last few days and the attack acted as a trigger to sell,'' said Michael Lynch, president of Strategic Energy and Economic Research, a Winchester, Massachusetts-based consultant. ``The report makes it clear that the refinery system can deal with the alleged distillate shortage.''
Refineries operated at 98.1 percent of capacity, the highest since the week ended Jan. 1, 1999. Analysts expected the report to show that refineries utilized 96.5 percent of capacity.
``Refinery utilization rates are pretty high and production has shifted to distillates,'' said Doug Leggate, senior oil analyst at Citigroup Inc. in New York. ``You are well on the way to recovery of distillate stocks if there is no major loss due to hurricanes. Distillate demand won't pick up until October.''
Crude oil supplies dropped 3.6 million barrels to 324.9 million, the report showed. Analysts expected a decline of 1.63 million barrels.
Last Updated: July 7, 2005 22:23 EDT
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