May 5, 2004
By Richard Mably
LONDON (Reuters) - Oil prices surged again on Wednesday, setting fresh 13-year highs, on worries about Middle East supply security and fears for summer gasoline shortages in the United States.
U.S. light crude at 1700 GMT (Noon EDT) was up 62 cents at $39.60 a barrel and U.S. gasoline set a new all-time high of $1.315 a gallon. In London, Brent crude rose 74 cents to $36.67 a barrel, its highest since October 1990, shortly after Iraq's invasion of Kuwait.
"Violence in the Middle East specifically targeting oil assets has raised the bar with regards to the fear of supply disruption," said Josh Sadler, energy analyst with Societe Generale.
An attack on Saturday by Islamic militants on foreign workers at a petrochemical plant in the Saudi Red Sea city of Yanbu followed a failed suicide bombing mission 10 days ago at Iraq's Basra oil export terminal.
"Saudi Arabia's oil infrastructure has three major export arteries and looks as defensive as it could be to attack. However the risks have clearly risen," said oil analysts at Deutsche Bank in a report.
Weekly gasoline inventory data from the United States at first sight appeared to provide some comfort for dealers worried about a summer supply crunch at U.S. pumps. The U.S. Energy Information Administration said gasoline stocks rose four million barrels to 204 million barrels in the week to April 30, above forecasts for a 1.5-million-barrel stockbuild.
But dealers said they remained worried that inventories may not build sufficiently to meet peak summer U.S. demand.
"The question being asked is whether stockbuilds in May and June will be enough to meet demand in July and August, when everyone takes to the road for vacation, and the industry's answer at the moment is 'no'," said Refco broker Nauman Barakat.
U.S. demand for motor fuel in the United States is rising fast, buoyed by motorists favoring low-mileage-per-gallon sports utility vehicles. The EIA said consumption over the last four weeks averaged 9.1 million bpd, up 3.8 percent over the same period last year.
U.S. gasoline inventories remain 3.3 million barrels lower than a year ago and total U.S. commercial oil reserves of 299 million barrels are at an 18-million-barrel deficit versus the same time last year.
Traders have been looking to the Organization of the Petroleum Exporting Countries for signs that it might ease production limits to contain price increases.
OPEC President Purnomo Yusgiantoro on Wednesday sought to soothe market concerns but declined to say whether or not the cartel is likely to raise production limits at a meeting in Beirut on June 3.
Oil also found support on Wednesday from potential supply problems in Nigeria and Georgia.
Police said hundreds of Muslims had been killed by Christian militia in ethnic fighting in the central Nigerian town of Yelwa. While Yelwa is far from the country's Niger Delta oil facilities, the violence fueled fears of a possible disruption from Africa's largest crude producer.
In Georgia, there were concerns about a disruption from the 200,000 barrel a day Black Sea Batumi export terminal. Georgian Defense Minister Gela Bezhuashvili told a local television station that the terminal, in the Adzhara region, had been mined.
Bezhuashvili did not say who had laid the explosives but rebel leader Aslan Abashidze is in control of Adzhara and its capital Batumi, in a stand-off with the Georgian government over control of the region.
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