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Friday, August 13, 2004 - Page updated at 12:00 A.M.
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Crude-oil price hits high over supply fears

By Seattle Times news services

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WASHINGTON — The price of crude oil surged again yesterday, reaching a record high above $45 per barrel amid concerns about disruptions in oil supplies from Iraq and elsewhere.

Impeded deliveries from Iraq may soon be followed by supply cuts in Russia by the Yukos oil firm and from oil producer Venezuela, where a nationwide referendum on the presidency of Hugo Chávez is scheduled for Sunday.

Adding to supply concerns, about 25 percent of U.S. Gulf of Mexico oil production of 1.7 million barrels per day was shut Wednesday by Tropical Storm Bonnie. Workers were returning to their platforms yesterday.

Some traders said concern about a terrorist attack during the Athens Olympic Games could boost prices further.

Traders yesterday were concerned about mounting tensions in Najaf, Iraq, where followers of Shiite Muslim cleric Muqtada al-Sadr reportedly threatened to damage oil pipelines.

"Everything's gone wrong in the oil market recently. If you wanted to paint the worst scenario picture, you couldn't do much better," said David Thurtell, commodities strategist at Commonwealth Bank of Australia.

The price of benchmark U.S. crude for September delivery on the New York Mercantile Exchange closed at $45.50, up 70 cents from Wednesday.

Factors pushing oil prices higher

• Fighting in Iraq disrupting output

• Russian government moves against Yukos oil firm

• Upcoming referendum vote on president of key producer Venezuela

• Continuing concern over possible terror attack in Saudi Arabia

• Storms in the Gulf of Mexico

During the past few weeks, prices of crude-oil futures have repeatedly hit their highest levels in 21 years of trading on the exchange. Adjusted for inflation, however, prices remain below the peak hit in 1981.

An announcement Wednesday by the Saudi Arabian government that it could increase production by 1.3 million barrels of oil a day, if need be, did nothing to allay those fears yesterday. Anthony Grisanti, president of GRZ Energy, said the fighting in Najaf added "a new thing to the mix" of fears.

Analysts said that if crude-oil prices continue to rise, consumers are likely to see the impact at the gas pump in coming weeks. But for now, prices are moderating.

A survey of gasoline prices nationally by a contractor for the AAA auto club shows that prices have declined slightly over the past month to $1.861 yesterday for a gallon of regular.

But as prices of oil have gone up in recent weeks, analysts said, there have been strong supplies of gasoline. The result has been that refineries have not been able to sell gas for the higher prices that it previously commanded, meaning the prices at the pump have held steady or decreased.

The jump in crude-oil prices has caused the heating-oil and diesel-fuel prices to rise. Analysts say there is strong demand and tight supply.

Iraq's oil output in the south remains at half its normal level because of loading constraints at its two Persian Gulf exporting terminals, an Oil Ministry official said. Iraq was the sixth-biggest source of U.S. oil imports during the first five months of the year, according to the Energy Department.

Venezuelans will vote Sunday on whether to recall Chávez. Petroleos de Venezuela SA, the state oil company is seeking to avoid a repeat of last year, when output and revenue were slashed after opponents of Chávez went on a nationwide strike to force the former paratrooper from office. Supporters have threatened a general strike if Chávez is voted out.

Venezuela is the fourth-biggest source of U.S. oil imports this year, according to the Energy Department.

On July 20 Russia said it planned to seize and sell Yuganskneftegaz, which pumps about 60 percent of Yukos' oil and accounts for more than two-thirds of the company's oil reserves. Yukos produces as much oil as OPEC member Libya.

Compiled from The Washington Post, Bloomberg News and Reuters

Copyright © 2004 The Seattle Times Company

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