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Prices high despite adequate fuel supply Original Source Link: (May no longer be active)
http://www.businessweek.com/ap/financialnews/D88TH8AG0.htm?campaign_id=apn_home_down"There are no fuel shortages, though traders are clearly pricing in that possibility, whether due to a terrorist attack, a refinery snag or some other unexpected supply bottleneck."
http://www.businessweek.com/ap/financialnews/D88TH8AG0.htm?campaign_id=apn_home_down
The Associated Press/SINGAPORE
By WEE SUI LEE
Associated Press Writer
Oil prices remain above $56 a barrel level
MAR. 18 12:47 P.M. ET Crude oil futures remained above $56 a barrel Friday as the market worried about supplies even after OPEC's president said the group may authorize pumping an extra half-million barrels a day.
Light, sweet crude for April delivery was flat at $56.40 a barrel in afternoon trading on the New York Mercantile Exchange, more than $1 below the intraday high of $57.60 per barrel set the day before.
In London, Brent crude rose 23 cents to $55.29 a barrel on the International Petroleum Exchange.
The feverish rally in recent weeks has been underpinned by a weak dollar and rising global demand at a time when there is very little excess supply immediately available. There are no fuel shortages, though traders are clearly pricing in that possibility, whether due to a terrorist attack, a refinery snag or some other unexpected supply bottleneck.
Although the Organization of Petroleum Exporting Countries agreed Wednesday to boost its output quota by 500,000 barrels a day, or 1.9 percent, the market brushed off the decision. Since members are already producing above their quotas, no extra supply will actually be added.
But OPEC left open the possibility of raising its output quota by an additional 500,000 barrels and signaled Thursday that such a move could come as early as next week.
"If prices stay as they are in the next seven to 10 days, we will start contacting minister colleagues to discuss the other 500,000 (barrels a day) that the president has the authority (to decide on) after consultations," said OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's energy minister.
On the same day, Rafael Ramirez, the minister for Venezuela, OPEC's third-largest member, said the lack of spare capacity "brings nervousness to the market."
Because crude is denominated worldwide in U.S. dollars, and because the currency has lost nearly 10 percent of its value against the euro in the past year, OPEC nations have signaled support for higher oil prices in order to maintain their buying power in Europe.
Lorraine Tan, Singapore director of research at Standard & Poor's Investment Services, said the market is also fueled by supply fundamentals, such as the insufficient investments in refineries.
"Many refineries are subject to shutdowns now because they are running on full capacity," she said. "So the market gets jittery."
With the world's demand at 84.3 million barrels a day, an unforeseen supply disruption later this year, such as a bad hurricane season in the Gulf of Mexico or political instability in Nigeria or Venezuela, could send prices even higher.
Copyright 2005, by The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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