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Oil hits 64 barrel over supply concern Original Source Link: (May no longer be active)
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Oil Rises to a Record $64 a Barrel on Saudi Supply Concern
Aug. 8 (Bloomberg) -- Crude oil in New York jumped to a record $64 a barrel as a threat to the U.S. embassy in Saudi Arabia heightened concern that supplies from the country, the world's largest exporter, could be jeopardized.
The American Embassy in Riyadh and consulates in Jeddah and Dhahran will be shut through tomorrow because of a threat against U.S. government buildings. The closings follow King Fahd's death on Aug. 1, which increased speculation about the stability of output from the region. Gasoline futures touched a record amid a series of refinery shutdowns.
``We're worried about a disruption to supplies,'' said Don Morton, senior vice president of energy trading at Advest Inc. in Portsmouth, New Hampshire. ``There's a moment of weakness here with the Saudi changing-of-the-guard. This could present itself as an opportunity to challenge the Saudi political structure,'' he said.
Oil for September delivery surged $1.63, or 2.6 percent, to close at a record $63.94 a barrel on the New York Mercantile Exchange. Today's intraday high of $64 was the highest since the contract debuted in 1983. Prices are up 45 percent from a year ago.
Fahd's successor, Crown Prince Abdullah, has been in charge of day-to-day affairs since the king suffered a stroke in 1995. The country holds about 25 percent of the world's proved oil reserves.
Adjusted for inflation, oil was more expensive during the 1970s.
Prices rose from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $75.44 in today's dollars.
Terrorist Threats
In London, September Brent crude-oil futures gained $1.63, or 2.7 percent, to close at a record $62.70 a barrel on the International Petroleum Exchange. Futures touched an all-time high of $62.76. Brent trading began in 1988.
Last month, the U.S. Embassy warned its citizens in Saudi Arabia of a possible terrorist attack in the kingdom.
At least 27 Westerners, 15 of them U.S. citizens, have died in bomb and gun attacks since May 2003, when 12 suicide bombers struck residential complexes in Riyadh where foreigners live.
$65 Oil?
``There's nothing that keeps us from going to $65,'' said Deborah White, a Paris-based senior energy analyst for Societe Generale SA.
``There are too many things going wrong for people to be short,'' said White, citing the terrorist threats, Saudi succession, refinery outages and the hurricane season in the Atlantic Basin. Shorts are bets that prices will fall.
Hedge-fund managers and other large speculators more than doubled their net-long position in New York oil futures in the week ended Aug. 2, according to U.S. Commodity Futures Trading Commission data released on Aug. 5. Longs are bets that prices will rise.
Retail gasoline prices also surged to a record. Crude oil accounts for about half the cost of a gallon of retail gasoline.
Pump prices averaged nationwide rose 3.2 cents to a record $2.339 a gallon as of Aug. 5, according to the AAA, the former American Automobile Association.
Gasoline Futures
Gasoline for September delivery touched $1.874 a gallon in New York, the highest since trading began in 1984. The previous record was $1.86 a gallon on July 8.
Prices for gasoline and oil have jumped as hurricanes threatened refineries and production platforms. Two hurricanes and one tropical storm halted production in the Gulf of Mexico since June.
U.S. forecasters on Aug. 2 said this year's Atlantic hurricane season will be stormier than previously predicted, producing as many as 21 tropical storms, 11 of which may become hurricanes. The season began in June and runs through November.
Oil companies have shut refinery units in the past few weeks, cutting production of fuels. A fire erupted last month at Chevron Corp.'s refinery in El Segundo, California, during maintenance of a crude-oil unit. BP Plc's Texas City, Texas, refinery suffered an explosion and a shutdown for maintenance last month.
``It's more like Murphy's Law. It has been a long time since things have been going right,'' White said.
Refineries
A two-week unit shutdown at Valero Energy Corp.'s refinery in Ardmore, Oklahoma, will trim fuel production, Mary Rose Brown, spokeswoman for the San Antonio-based company, said today.
Exxon Mobil Corp.'s refinery in Joliet, Illinois, resumed operation over the weekend after the failure of a water cooling system forced a shutdown July 30, said spokesman Patrick McGinn.
ConocoPhillips, the largest U.S. oil refiner, suffered a power interruption over the weekend at its Borger, Texas, refinery, according to a filing with the state's Commission on Environmental Quality.
U.S. gasoline inventories probably fell last week for the sixth week in a row, according to the median of forecasts by eight analysts before an Energy Department report on Aug. 10. Stockpiles in the week ended July 29 were down 2 percent from the 5-year average, according to government figures.
Crude-oil supplies probably fell for the fifth time in six weeks, according to the Bloomberg survey.
Oil for delivery in January through April next year traded above $66 a barrel on the Nymex.
Last Updated: August 8, 2005 16:04 EDT
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