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Oil price surges again as Gustav sends Gulf workers packing

telegraph.co.uk

Oil price surges again as Gustav sends Gulf workers packing 

Last Updated: 1:49am BST 28/08/2008

 

 

Fears of an impending hurricane off Mexico have added to market pressures, reports Roland Gribben

A hurricane threat to oil and gas production in the Gulf of Mexico produced a renewed surge in the cost of oil yesterday.

Fears that tropical storm Gustav would develop into a major hurricane saw prices in New York rise $1.64 to $117.91 a barrel at one stage. In London Brent oil, the North Sea price market, edged up $1.59 to $116.22.

Oil companies have already started evacuating crews from the Gulf installations as a precaution against the threat to life and the damage to offshore platforms. Analysts estimate that 85pc of Gulf output could be suspended if the hurricane strikes.

Gustav is seen as a bigger threat than Fay – the tropical storm that stopped short of reaching hurricane proportions two weeks ago – to Gulf operations. It has moved away from Haiti and the Dominican Republic after killing 16 people.

Weather forecasters attempting to chart Gustav’s possible progress from storm to hurricane status have drawn a wide arc from Florida to Texas.

Oil companies have adopted a safety-first approach in the Gulf after a hurricane in 2005 when production was disrupted. They now “prepare for the worst”, particularly during the hurricane season and are ready to evacuate staff to reduce risks to life.

The weaker dollar, an unexpected rundown in crude and petrol stocks in the US, the continued tension between Russia and the West over Georgia and fears about a new-style Cold War were among other factors influencing prices.

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  • Traders feel that yesterday’s price spike may be short-lived, although much will depend on whether Gustav lives up to forecasters’ expectations. The recent $5-a-barrel jump on the back of fears about Fay and geo-political issues was short-lived.

    Speculation was also growing yesterday about progress on another “cold war” front – the long-running dispute between four Russian oligarchs and BP over the future structure and control of the TNK-BP joint venture in Russia.

    The two sides are continuing talks to try to settle fundamental differences over management and strategy, but suggestions that a deal was only “weeks away” were being played down.

    The oligarchs whose TNK-BP shareholding is in the hands of the AAR consortium want to see the BP-led management replaced by “highly incentivised” outsiders and the business given an international, rather than a purely Russian, dimension.

    BP, anxious to maintain its 50pc shareholding because of the importance of the joint venture’s contribution to profits, has been forced into a corner by political pressure in Russia and AAR’s tactics.

    The future of “exiled” Robert Dudley, TNK-BP chief executive, who left Russia to run the business from a secret central European location, is one of the crucial issues.

    Moscow commentators say that the sooner BP recognises he has no future in the joint venture the better, but the British oil giant wants a “new deal” that protects its shareholding as well as maintaining influence in decision-making by any new board.

    http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/28/cnoil128.xml

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