Aug. 4, 2004
(Bloomberg) -- Crude oil futures rose to records in London and New York as concern mounted that OPEC and other producers have limited capacity to compensate for disruptions to supply.
The Organization of Petroleum Exporting Countries produced the most oil in 25 years in July, a Bloomberg survey showed, and OPEC President Purnomo Yusgiantoro said yesterday further output gains won't be immediate. Growing demand in the U.S., China and India is straining producers.
``There's a limited amount of spare capacity and the market is a bit too paranoid about potential supply disruptions,'' said Craig Pennington, the head energy analyst at Schroders Plc in London. ``Unless we see some evidence of actual disruptions, it's unlikely we'll see $50'' for New York crude.
Brent crude oil for September settlement rose to $40.99 a barrel, beating the intraday record of $40.95 of Oct. 10, 1990. It rose 30 cents, or 0.7 percent, to $40.94 on London's International Petroleum Exchange at 1:23 p.m. local time.
On the New York Mercantile Exchange, crude for September delivery also reached a record, of $44.30 a barrel. Yesterday it closed above $44 for the first time since the contract was introduced in 1983.
Oil has gained partly because of concern shipments may be disrupted from OPEC members such as Venezuela, Iraq and Nigeria and other producers including Russia's biggest exporter, OAO Yukos Oil Co. Consumption of oil is set to rise a record 2.5 million barrels a day this year, according to the International Energy Agency.
Fourth-Quarter Demand
Oil traders ``are convinced that OPEC can't possibly meet fourth-quarter demand even if we don't suffer supply losses from Yukos, Venezuela or Nigeria,'' Deborah White, an oil economist at SG Economic Research in Paris, said in an e-mail.
Demand usually rises toward the end of the year as refiners stockpile distillate fuels, such as heating oil and diesel, in preparation to meet demand during the Northern Hemisphere's winter.
U.S. crude oil inventories probably declined by 1 million barrels last week from 300.5 million a week earlier, according to the median forecast in a Bloomberg survey of 12 analysts, as refineries operated at 96.7 percent of capacity. Distillate stockpiles may have risen 1 million barrels.
``People are pretty nervous here in the trading floor before the U.S. inventory figures come out,'' said said Lee Elliot, a trader with GNI Ltd. in London.
The U.S. imported a record 11.3 million barrels of crude oil a day in the week ended July 23.
Market Momentum
``If we can see that translated into more distillate and gasoline, it might give pause to the market momentum,'' Peter Beutel, the president of energy consultants Cameron Hanover Inc. in New Canaan, Connecticut, said in a research note.
The Energy Department will publish its report at 10:30 a.m. Washington time.
OPEC produced an average of 29.71 million barrels a day in July, up 1.4 percent from June, according to a Bloomberg survey of oil companies, producers and analysts. It was the highest since an average of 30.72 million in 1979, according to U.S. Energy Department figures.
Saudi Arabia, the world's largest oil exporter, can add another 1 million barrels a day of output as needed to the 9.5 million barrels a day it's pumping, an official said yesterday.
Oil's recent gains have been driven by concern about attacks on Iraqi pipelines and potential disruptions to Russian exports. Oil shipments on supertankers from the Persian Gulf rose to a three-month high in July, according to data compiled by Bloomberg.
Oil output in Nigeria, Africa's largest producer and the fifth-largest supplier to the U.S., is often disrupted by labor disputes and ethnic and political violence. A six-day shutdown last month at Total SA's operations in Nigeria helped boost world oil prices that were already close to a record.
Venezuela's Sutiss union will lead a nationwide strike if a referendum Aug. 15 recalls President Hugo Chavez, Globovision television reported Saturday, citing the union's president, Ramon Machuca. Venezuela is the world's fifth-largest oil producer.
In Russia, Yukos is embroiled in legal fight with the government over back taxes. The company says paying the tax claim could bankrupt it.
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