Crude Oil Rises as Hurricane Heading
for Gulf of Mexico Strengthens
By Grant Smith found August 17, 2007 at bloomberg.com
Aug. 17 (Bloomberg) -- Crude oil rose after a hurricane strengthened as it
headed toward the Gulf of Mexico, home to more than a quarter of U.S. oil
output.
Hurricane
Dean battered the Lesser Antilles in the Caribbean today and is expected to
cross Mexico's Yucatan Peninsula on Aug. 21 before blowing into the Gulf of
Mexico.
The hurricane could threaten the U.S. Gulf Coast by the middle of next week,
according to the reinsurance company R.K. Carvill International Holdings Ltd.
Traders
work in the crude oil futures pit
``Hurricane Dean should not yet be counted off,'' said Olivier Jakob,
managing director at Petromatrix GmbH in Zug, Switzerland. ``History has shown
that a hurricane crossing across the Yucatan can quickly regain strength once it
steps back into the Gulf.''
Crude oil for September delivery rose as much as 88 cents, or 1.2 percent, to
$71.88 a barrel on the New York Mercantile Exchange. It was at $71.64 at 12:30
p.m. in London.
Brent crude for October rose as much as $1.05 cents, or 1.5 percent, to
$70.47 a barrel on the ICE Futures Exchange in London. The contract traded at
$70.40 at 12:30 p.m.
``Ultimately, hurricanes are not over,'' said Harry Tchilinguirian, a senior
oil market analyst at BNP Paribas in London. ``We actually have a fairly bullish
picture in oil. What we're looking at now is a short-term correction born out of
weak economic figures in the U.S.''
Dean, the season's first Atlantic hurricane, accelerated as it swept west
between St. Lucia and Martinique with sustained winds of 100 miles (161
kilometers) an hour. The Category 2 hurricane was forecast to strengthen
further, according to a statement posted on the National Hurricane Center Web
site at 4:30 a.m. Miami time.
``The hurricane season still has the potential to cause sharp surges in the
price of oil,'' the U.K.'s Automobile Association Ltd. said in an e-mail.
Equity Rebound
Oil, little changed this week, has fallen about 9 percent from the $78.77
record set on Aug. 1. Oil fell with U.S. equity prices, which dropped 5.7
percent the past week on concern losses on subprime mortgages may spread across
the world's biggest economy.
``We're looking at two different markets: the real oil market is still a buy
right now, but it's being dragged down by other forces in the global financial
market,'' said Rob Laughlin, a senior broker at MF Global Ltd. in London.
``Fundamentals have not really changed, and the problem hotspots are still
there.''
Chevron Corp. reported yesterday a fire broke out at its 330,000-barrel-a-day
refinery in Pascagoula, Mississippi. Valero Energy Corp. said yesterday gasoline
output at its Port Arthur plant in Texas may be cut by 70,000 barrels a day for
about a week following a fault in a coking unit.
OPEC's Options
The Organization of Petroleum Exporting Countries, which has announced 1.7
million barrels a day of supply cuts in the past year, will probably keep
production unchanged during its next meeting on Sept. 11 in Vienna, according to
BNP's Tchilinguirian.
``They'll probably just sit there and say they'll just monitor the situation
until it becomes more evident that they should intervene,'' Tchilinguirian said.
Crude oil inventories in the U.S., 10.1 percent above their five-year average
at 335.2 million barrels, declined for a sixth week, the country's Energy
Department reported Aug. 15. Stockpiles fell 5.2 million barrels in the week to
Aug. 10, double the result expected in a survey of analysts by Bloomberg News.
``A substantial increase in OPEC output will be needed to bring the market
back into balance,'' Goldman Sachs Group Inc. analysts led by Jeffrey Currie in
London said in a report today. ``These liquidation-driven pullbacks will likely
be short-lived and represent increasingly attractive buying opportunities.''
Crude oil may fall in New York next week on concern economic growth will slow
and reduce fuel demand. Seventeen of 42 analysts surveyed by Bloomberg News, or
40 percent, said prices would decline. Thirteen, or 31 percent, said oil would
rise and 12 predicted little change.
To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
Last Updated: August 17, 2007 08:16 EDT
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