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Oil prices surge to record US$66.10
Crude oil prices Friday rose to new highs, climbing past US$66 a barrel, as reports of new U.S. refinery outages rekindled fears that gasoline supplies in the world's biggest consumer would struggle to meet rising demand, AP reported. Midmorning in Singapore, light, sweet crude for September delivery rose as high as US$66.10 a barrel in Asian electronic trading on the New York Mercantile Exchange. It then slipped back a bit to US$66.08, up 28 cents. On Thursday, crude touched the US$66-a-barrel mark before settling at US$65.80, up 90 cents on the day. Gasoline rose 1.3 cents to US$1.9630 a gallon (3.8 liters) while heating oil rose a cent to US$1.9097. Analysts said gasoline demand, currently at its peak in the U.S. summer driving season, was driving crude's gains. Last week, U.S. gasoline demand picked up by 1.4 percent from a year ago, according to government data. Coupled with new reports of refinery outages this week, traders fear U.S. refiners, already running at near-maximized capacities, are straining to satisfy the rising demand. "People fear there won't be enough gasoline at a time when it's so greatly demanded, so they're just buying, buying and buying," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. Oil prices are almost 50 percent higher than a year ago, but they would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980. The U.S. Energy Department said Wednesday gasoline inventories fell 2.1 million barrels to 203.1 million last week. "The refinery breakdowns are a big issue, they're happening at a time when gasoline supplies are already very tight," Emori said. Among the latest refinery outages: several units at ConocoPhillips' 306,000 barrel-a-day Wood River, Illinois, refinery were shut after a thunderstorm caused a power failure at the plant. Also, BP PLC shut down a hydrogen recovery unit August 10 at its massive 470,000 barrel-a-day Texas City refinery, following a decision by the company to keep high-pressure units off line until they can be proven safe, BP Spokesman Scott Dean said Thursday. The three other high-pressure units at the refinery _ the residual hydrotreater, the ultracracker and the gas oil hydrotreater _ were already off line Wednesday and will be kept down pending investigations, Dean said. The incidents are the latest in a string of outages to hit about a dozen U.S. refineries that together can process 2.7 million barrels a day of crude oil, some 16 percent of total U.S. refining capacity. But some analysts were less certain the recent run-up in prices was entirely based on fears of the impact of refinery snags, which are not out of the ordinary for this time of year, when plants run hard to meet peak gasoline demand. "Whether refinery outages are the only support for this market remains a mystery, as supply and demand fundamentals appear to be somewhat bearish," said Energyintel analyst George Orwel in a research note. Also, analysts said that traders were focusing selectively on information that would send prices higher. Traders appeared to discount a downward revision in oil demand forecast by the International Energy Agency released Thursday. The group's monthly report projected that demand would be 150,000 barrels a day less then it expected, as demand from China appears to show signs of weakening. Instead, the focus seemed to be on sections of the report that reduced its estimate of output by Russia and other nonmembers of the Organization of Petroleum Exporting Countries, analysts said.
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