09.21.2004, 01:33 PM
Oil prices bounded higher for the fourth day in a row Tuesday, with traders
expecting further declines in the nation's supply as petroleum producers
disrupted by Hurricane Ivan continue to regroup.
Light sweet crude for October delivery rose 75 cents to $47.10 per barrel in
afternoon trading on the New York Mercantile Exchange.
Some 8 million barrels of oil production in the Gulf of Mexico have been lost
over the past week, according to the federal Minerals Management Service.
Delayed oil shipments have taken an additional toll on U.S. supplies, which
normally grow this time of year as gasoline demand tapers off and refiners
temporarily shut down to perform maintenance.
The Energy Department reported last week that commercially available oil
supplies declined by about 7 million barrels. The agency makes its next report
Wednesday and traders are anticipating another strong draw.
"Expectations are for another big number this week," said Mario Chavez, vice
president of global energy futures at ABN AMRO in New York.
While the supply dislocation caused by Hurricane Ivan is expected to be
short-lived, analysts said the underlying tightness in global oil markets is
not and that is why prices are rising on every apparent production or delivery
snag.
"The problem with oil markets is structural," said Lawrence J. Goldstein,
president of PIRA Energy Group in New York.
One of the key issues is that the amount of excess production available
worldwide is about 1 percent of total demand of about 82 million barrels a day,
Goldstein said, leaving little breathing room in the event of a prolonged
supply interruption.
As a result, energy traders have been quick to respond to any news that could
potentially crimp the flow of oil, even for a short period of time.
For example, the sabotage of Iraqi pipelines by insurgents has caused sporadic
export problems and propped up world oil prices.
On Monday, prices rose after cash-strapped Russian oil giant Yukos said it
would halt some oil exports to China because it could not afford to pay the
transport expenses.
Yukos, which must pay back taxes of $7 billion for 2000 and 2001, has unnerved
markets all summer long with warnings that its production could suffer as a
result of its financial troubles.
The actual amount of exports to be halted by Yukos is about 100,000 barrels per
day, a small amount.
But until private and state-owned oil companies make the investments necessary
to boost the world's production and refining capacity, Goldstein expects even
minimal supply problems to send oil prices higher so long as demand keeps
rising.
http://www.forbes.com/technology/ebusiness/feeds/ap/2004/09/21/ap1553926.html
--
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