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Oil and Gas Prices Hit Records Following Trouble at Refineries

THE WALL STREET JOURNAL: Oil and Gas Prices Hit Records Following Trouble at Refineries

“Refinery outages have lifted gasoline futures more than 10% in the past two weeks. In the latest, a gasoline-producing unit at Motiva’s Norco, La., refinery was shut Thursday and was in the process of restarting Friday. Motiva is a joint venture between Royal Dutch Shell PLC and Saudi Aramco.”

Monday 8 August 2005

By MASOOD FARIVAR
DOW JONES NEWSWIRES
August 8, 2005; Page C4

Fresh news of trouble at U.S. refineries added to worries about summertime supplies and sent crude-oil and gasoline prices to record high settlements Friday.

The September crude-oil contract on the New York Mercantile Exchange jumped 93 cents to $62.31 a barrel, the highest settlement since the contract began trading in 1983. Friday’s strong close suggests the market is poised to set fresh record highs this week, said Chris McCormack, a technical analyst and broker at brokerage firm ABN Amro. A breach of last Wednesday’s intra-day high of $62.50 could send the contract to $63.40 “at a minimum.”

The September gasoline contract settled at an all-time high of $1.8322 a gallon, a rise of 2.99 cents.

Refinery outages have lifted gasoline futures more than 10% in the past two weeks. In the latest, a gasoline-producing unit at Motiva’s Norco, La., refinery was shut Thursday and was in the process of restarting Friday. Motiva is a joint venture between Royal Dutch Shell PLC and Saudi Aramco.

Operational problems aren’t uncommon at refineries, but an unusually high number of outages has cropped up this year, a development some analysts chalk up to refiners’ need to run flat out to meet rising oil demand. The outages involve units at 10 refineries that together have the capacity to run 2.1 million barrels a day of oil, or 12% of total U.S. capacity.

“The path of least resistance is to the upside, and nobody wants to go home with any kind of exposure,” said Mike Fitzpatrick, vice president at brokerage firm Fimat USA in New York. “Demand is way high, and anything that takes away from supply, like a refinery outage, is going to have a deleterious effect on prices.”

Natural-gas futures gained 22.9 cents to settle at $8.70 per million British thermal units, a nine-month high, helped by the rise in crude oil as well as concerns that heavy electricity demand is eating into gas available for winter storage.

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