Royal Dutch Shell Plc  .com Rotating Header Image

Oil Nears $50 as Gulf Storms Curtail Output

THE NEW YORK TIMES: Oil Nears $50 as Gulf Storms Curtail Output

“A spokesman for Royal Dutch/Shell, Andy Corrigan, said in London that Shell had evacuated 235 nonessential workers from the Port Harcourt region of Nigeria on Friday because of a “tense security situation.”

By JAD MOUAWAD

Published: September 28, 2004

Oil prices rose to another record yesterday but remained just below the $50-a-barrel mark, as traders expressed concern that recent hurricanes had hurt output in the United States at a time commercial supplies remained low.

On the New York Mercantile Exchange, oil for November delivery settled at $49.64 a barrel, up 76 cents, after touching $49.74 earlier in the session, the highest level since crude oil began trading on the exchange in 1983. The price rose above $50 a barrel in electronic trading after hours.

The market’s volatility also seemed to reflect the possibility of new clashes in Nigeria between the army and a regional group of militants, threatening output and even-higher crude oil prices. A statement from the rebels late yesterday warned of an “all-out war on the Nigerian state” starting Friday and advised oil companies to shut down production by then, a Reuters report from Lagos, Nigeria, said.

Oil futures prices have risen sharply this year as traders worried about interruptions in supplies at a time there is little spare capacity. Commercial oil inventories in the United States are close to a 29-year low while members of the Organization of the Petroleum Exporting Countries are producing near their capacity.

Analysts say that worldwide demand is running around 82 million barrels a day and that the untapped spare capacity is about one million barrels. Negative news from exporters or potential exporters like Russia and Iraq has helped push prices higher in recent months.

In New York yesterday afternoon, leading stock indexes dropped as oil prices climbed. Shares of oil companies rose.

In Washington, the Energy Department reported a 5.1-cent increase last week in retail gasoline prices, to $1.917 a gallon on average nationwide for regular unleaded gas.

The increase in crude oil prices came amid word from the federal Minerals Management Service that one-third of daily production in the Gulf of Mexico is still being disrupted from the effects of Hurricane Ivan, which struck the Florida Panhandle and other gulf points a week and a half ago. The gulf region accounts for a quarter of the United States’ domestic output. Since Sept. 13, the cumulative loss of production from the region has been 11.3 million barrels, or about 1.9 percent of the yearly output there, the Minerals Management Service, an Interior Department agency, said.

Thomas Bentz, a senior energy analyst with BNP Paribas in New York, commented that “with low stocks and OPEC producing at full capacity, we currently can’t afford to have any disruptions anywhere.”

“And we’re only halfway through the hurricane season,” Mr. Bentz said.

With the passage of Hurricane Jeanne over the weekend, Florida and the Caribbean have had a record four hurricanes in six weeks – Charley, Frances, Ivan and Jeanne – causing widespread devastation and more than 1,500 deaths, the greatest number of those drowning victims in Haiti in the most recent storm.

Oil traders and companies, meanwhile, monitored the news from Nigeria, an OPEC nation that produces 2.4 million barrels a day. Government forces there have clashed over the years with groups seeking greater access to the country’s resource wealth.

A spokesman for Royal Dutch/Shell, Andy Corrigan, said in London that Shell had evacuated 235 nonessential workers from the Port Harcourt region of Nigeria on Friday because of a “tense security situation.” He said output had not been affected. Shell produces about 900,000 barrels a day in Nigeria, Africa’s most populous country.

Deborah White, an economist at Société Générale in Paris, said tension between the government and trade unions could lead to production stoppages. “People on the markets are basically freaking out at what’s going on in Nigeria,” she said.

The statement from Nigeria late yesterday was issued in the name of the Niger Delta People’s Volunteer Force, a little-known group with apparent links to the Ijaw ethnic group. It urged all foreigners to leave the Niger delta, according to the Reuters report. Mujahid Dokubo Asari, identified as the group’s leader, said rebel forces would not take responsibility for harm to foreign nationals and he advised embassies and oil companies to withdraw their people.

“That means they have to close their facilities,” he said, as quoted by Reuters. “Anyone who assists the Nigerian state” in making money in the region, he added, “will be seen as a collaborator and an enemy and will be targeted.”

Because oil companies have been drawing on their inventories to make up for lost production, the inventories have fallen for eight weeks to the lowest level since February.

The drawdown means that the companies may have less crude oil to refine into heating fuel for the period of peak demand this winter.

At the same time, OPEC nations have been producing about 30 million barrels a day, their highest level in 25 years.

Most of OPEC’s 11 members are producing at capacity. Only Saudi Arabia, which pumps 9.5 million barrels a day, can increase daily production, by perhaps a further 1 million to 1.5 million barrels.

With not much more that OPEC countries can do to help ease prices, many analysts now expect oil prices to go above $50 a barrel before the end of the week.

“There are no signs of a peak on the market,” Mr. Bentz of BNP Paribas said. “$50 a barrel is a big psychological number, but there’s nothing on the charts saying $50 is a peak.”

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Oil Nears $50 as Gulf Storms Curtail Output”

Leave a Comment

%d bloggers like this: