October 5, 2004
By Simon Webb
LONDON (Reuters) - Oil prices hit a new record near $51 a barrel on Tuesday as a prolonged U.S. production outage following Hurricane Ivan attracted fresh speculative buying.
U.S. light crude set a high of $50.91 a barrel in electronic dealing before easing to stand up 77 cents at $50.68 ahead of pit trade.
London Brent moved to a record $47.15 a barrel and by 1345 GMT (9:45 a.m. EDT) was up 67 cents at $46.86 a barrel.
Supply anxiety is building ahead of the northern hemisphere winter, when demand for heating oil surges. Inventories of crude and distillates in the world's top energy user, the United States, are running as much as 4 percent below last year.
"U.S. production has been slow to recover from Hurricane Ivan and people are worried by the low level crude and distillate inventories ahead of winter," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
"People are still watching Nigeria and Iraq. With OPEC producing almost at full capacity, any stoppage in Iraq's or Nigeria's exports would upset the supply-demand balance. It's a very dangerous situation."
In the U.S. Gulf of Mexico, nearly 29 percent or about 480,000 barrels per day (bpd) of oil output remain shut three weeks after Hurricane Ivan first hit the region, the U.S. Minerals Management Service said on Monday.
U.S. consultancy PIRA Energy estimates at least 40 million barrels equivalent of oil and gas will be deferred by Hurricane Ivan.
PIRA said it calculates 17 million barrels of oil, four million barrels of natural gas liquids and 110 billion cubic feet of natural gas will be shut in by the hurricane.
The estimate includes an assumption about Ivan losses in the rest of October and into November.
Dealers will now look to U.S. oil inventory data, due out on Wednesday, to gauge how comfortable oil supplies are in the weeks approaching winter.
A Reuters poll of eight analysts predicted on average a fall in distillate stocks -- including heating oil, the main winter fuel in the northeast of the country -- by 800,000 barrels and a drop in gasoline stocks by 600,000 barrels.
The weekly report by the Energy Information Administration due was expected to show crude stocks rising in the week to Oct. 1 by 1.1 million barrels from the week earlier.
Oil prices had eased on Monday after Nigerian rebels withdrew a threat to target the country's over 2.3 million bpd of oil production facilities, but concerns lingered over the OPEC member's stability in the near term.
Iraq also remains volatile, with saboteurs still targeting pipelines. On Monday an internal line linking the country's north and south fields was hit, although this did not affect exports.
Together the two countries produce over 4.5 million bpd, about three times the amount of spare production capacity held by members of the Organization of the Petroleum Exporting Countries (OPEC), most of that in Saudi Arabia.
Market bulls are encouraged by signs that speculative funds, a major factor in this year's steep oil price rally, continue to buy into the market.
Speculators on crude oil on the New York Mercantile Exchange increased net long positions in the week ended Sept. 28 in a bet prices would rise, the U.S. Commodity Futures Trading Commission said.
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