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THE NEW YORK TIMES: Oil Prices Hit $60 as Storms Stoke Fears

THE NEW YORK TIMES: Oil Prices Hit $60 as Storms Stoke Fears

“Oil majors Chevron and Shell said they had evacuated some workers because of the storm, but production was not affected.”

Posted Wednesday 6 July 2005

By REUTERS

NEW YORK (Reuters) – Oil prices jumped on Tuesday as tropical storms threatening the Gulf of Mexico added to worries that supplies will fail to build in time for peak fourth-quarter demand.

Skip to next paragraph U.S. oil prices settled 84 cents higher at $59.59 a barrel after touching $60.10. The gain came on top of a rally late last week that halted a fall from the all-time high of $60.95 on June 27. Brent crude (LCOc1) in London rose 35 cents to $58.29 a barrel, extending gains from Monday when the U.S. market was shut for Independence Day.

The National Hurricane Center in Miami said Tropical Storm Cindy was headed for the Louisiana to Florida coast, potentially threatening oil infrastructure in the Gulf of Mexico. The federal Minerals Management Service said oil companies had shut more than 3 percent of daily gulf oil and gas production as a precaution.

The gulf is home to one quarter of U.S. oil and gas output.

The NHC also said a depression had formed into Tropical Storm Dennis on Tuesday and was threatening to hit Cuba by Friday.

Oil companies expected little total production impact from Cindy, especially compared with last September’s Hurricane Ivan. But it was the earliest date on record for four named tropical storms, underscoring forecasts for a heavy 2005 hurricane season, the NHC said.

Oil majors Chevron and Shell said they had evacuated some workers because of the storm, but production was not affected. BP also said it removed nonessential workers, but would not say if output was cut.

“It adds to existing concerns about fourth-quarter shortages,” said Christopher Bellew of Bache Financial. “Even people who have been bearish prefer to sit on the sidelines, rather than to sell.”

News of the storm had a bigger impact on product futures than on crude, driving U.S. heating oil futures (HOc1) to a new record of $1.765 a gallon before settling at $1.7324.

U.S. crude oil inventories are close to their highest level for six years.

But distillate stocks — including high-demand fuels diesel and heating oil — are at the lower half of the average range for the time of year, fostering doubts about refiners’ ability to meet peak demand in the fourth quarter.

The focus on oil products has blunted efforts by the Organization of the Petroleum Exporting Countries to soothe supply worries by pumping more than 30 million barrels per day (bpd), the highest in 25 years.

OPEC last week suspended talk of increasing production by a further 500,000 bpd, a decision analysts said had had limited impact in a market supported by refinery bottlenecks rather than a shortage of crude. OPEC’s president said last week the group would bring on the extra production if prices rose to $60 a barrel.

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