Sep 2005 Financial News

Oil price makes biggest one-day jump — ever!

Sep 20, 2005

NEW YORK: Crude oil futures surged more than US$4 — the biggest one-day price jump ever — amid worries that Tropical Storm Rita strengthening off the Bahamas could hit US oil facilities in the Gulf of Mexico later this week, striking another blow at an industry struggling to recover from Hurricane Katrina.

The swells in crude, heating oil and gasoline futures came as OPEC ministers met to discuss how to relieve price pressures in the oil market and expressed concern that Rita would bear down on the hurricane-ravaged US Gulf Coast.

Benchmark light, sweet crude for October delivery rose US$4.39, or 7 percent, to settle at US$67.39 a barrel on the New York Mercantile Exchange.

Nymex crude — still more than US$3 off its all-time high of US$70.85 hit briefly on August 30 after Katrina hit the Gulf — had fallen US$1.75 on Friday to its lowest closing price since August 5.

Heating oil surged more than 20 cents to US$2.0384 a gallon, while gasoline rose nearly 26 cents to US$2.0427 a gallon.

Brent crude for October rose US$3.80 to US$65.61 on London’s International Petroleum Exchange.

"The main driver today is Tropical Storm Rita.

"We really can’t afford to lose more production," said Phil Flynn, analyst at Alaron Trading Corp in Chicago.

In Florida, thousands began evacuating the Florida Keys as Rita built up speed off the Bahamas about 380 miles (611 kilometres) from Key West. Rita, which strengthened Sunday into a tropical storm, had sustained winds of 70 mph and was forecast to be in the Straits of Florida between the Keys and northern Cuba yesterday, possibly as a Category One hurricane with winds of at least 74 mph, forecasters said.

Long-range forecasts showed the system moving into the Gulf of Mexico late in the week as a hurricane, then possibly approaching Mexico or Texas. Forecasters warned those across the US southern coast, however, which is still recovering from the impact of Hurricane Katrina, that long-term predictions are subject to large errors.

If Rita strikes Texas, the biggest oil refiner in the country, it could spell serious disruption to the industry.

Texas has 26 petroleum refineries, most of which are located along the coast, with the capacity to pump 4.6 million barrels a day. That’s more than a quarter of the US total refining capacity, according to the US Department of Energy.

Natural gas futures also soared yesterday, rising US$1.519 to settle at a new high of US$12.663 per million British thermal units.

Huge swings in the oil market have become the norm these days, said Oil Price Information Service analyst Tom Kloza, and the market was ripe for another rally, coming off a huge drawback on falling demand and Katrina recovery efforts.

"This is speculation and fear about what is more or less a typical September event," said Kloza, pointing to Hurricane Ivan, which shut down rigs and disrupted refining last fall. "It really underscores how maniacal the entire oil trading business has become."

About 55 percent of oil production and 35 percent of gasoline production in the Gulf remains blocked in the wake of Hurricane Katrina, the Minerals Management Service said yesterday.

OPEC ministers sought to reassure oil markets that supplies are plentiful.

The ministers appeared near agreement to make two million extra barrels of oil a day available — a move aimed at easing fears over an expected spike in demand as the winter heating season approaches.

They were to decide today whether to offer the extra oil or boost the current output ceiling of 28 million barrels a day by 500,000 barrels.

Previous OPEC pledges have done little to stabilise prices this year, which spiked on concerns that there is little spare crude left from rising demand, but officials and analysts have also blamed high prices on the lack of refinery capacity to process products.

Analysts have called OPEC moves symbolic as the cartel is already pumping more than its quota.

Supply concerns are likely to increase as the Northern Hemisphere winter approaches, when demand for petroleum products such as heating oil, diesel and jet fuel rise.


The Trinidad Newday
Tuesday, 20th Spetember, 2005
http://www.newsday.co.tt/stories.php?article_id=28896