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Oil at $62 on Worries Over World Supplies

NEW YORK TIMES: Oil at $62 on Worries Over World Supplies

“The spate of refinery problems in the U.S. Gulf Coast continued, with Motiva Enterprises LLC, a joint venture between Royal Dutch Shell and Saudi Aramco, shutting a crude unit at its Norco, Louisiana, refinery for repairs.”

Wednesday 3 August 2005

By REUTERS

Published: August 3, 2005

Filed at 2:37 a.m. ET

SINGAPORE (Reuters) – Oil rose above $62 a barrel on Wednesday, just shy of its record high, as expectations of tight U.S. supplies and disruptions added to concern over the long-term stability of Saudi Arabia after the death of King Fahd.

Skip to next paragraph U.S. light sweet crude for September delivery was up 16 cents at $62.05 a barrel in Asian trade, within striking distance of the all-time peak of $62.30 set on Monday, after hitting a high of $62.08.

London Brent crude was at $60.83 a barrel, up 21 cents from Tuesday and also near its record high of $60.98.

The firmer tone was underpinned by concern about Atlantic hurricanes. As many as 21 named storms and 11 hurricanes are forecast for the 2005 hurricane season, matching a record set in 1933, U.S. government forecasters said.

“There seems to be some concern over an unusually active U.S. hurricane season that has already seen seven named storms in June and July, well ahead of when the season is supposed to start in August,” said Commonwealth Bank of Australia’s David Thurtell.

“But I think the concern over the Saudi political situation is a little bit overdone really. It’s something that should settle rather quickly. After all, there’s no real immediate political change.”

The reins of Saudi Arabia, the world’s top oil producer, have been passed on to King Abdullah, ensuring a continuation of the kingdom’s oil policy and close alliance with the West.

Even so, analysts see him as a transitional ruler and say there are question marks over future successions in the leading member of the OPEC cartel, which may not go as smoothly.

The kingdom is pumping about 9.5 million barrels per day (bpd) of crude and has vowed to keep spare production capacity of 1.5 million to 2.0 million bpd to meet any supply shortfalls.

SHORT SUPPLY

The market was also propped up by a series of U.S. refinery problems and expectations that a government report would show a fifth straight weekly draw in crude supplies, along with low stocks of gasoline.

A Reuters survey of 14 analysts predicted that gasoline stocks would fall 900,000 barrels during the peak demand season, casting a pall over higher refining production and imports.

U.S. gasoline demand is some 2.4 percent higher than a year ago. Car manufacturer General Motors Corp. said sales of gas-guzzling SUVs were at an all-time high in July.

Crude oil stocks are expected to have fallen a modest 1.6 million barrels in the week ended July 29, though those surveyed expected inventories to rebound, while distillates stocks are seen rising 1.9 million barrels.

The spate of refinery problems in the U.S. Gulf Coast continued, with Motiva Enterprises LLC, a joint venture between Royal Dutch Shell and Saudi Aramco, shutting a crude unit at its Norco, Louisiana, refinery for repairs.

Exxon Mobil Corp. shut down its 235,000-bpd refinery in Joliet, Illinois, on Saturday night due to a failure in its cooling water system, while BP Plc. shut a gasoline-producing unit over the weekend at its giant Texas City refinery after a fire.

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