- The Washington Times - Friday, October 1, 2004

Oil closed above $50 a barrel for the first time yesterday in New York trading as tight supplies, political uncertainty and hurricane damage drove prices to a record high.

“Between political turmoil in Russia, civil war in Nigeria, anarchy in Iraq … terrorism, and in addition Mother Nature coming to the party with a heavy hand, there was no shortage of excitement,” said Fadel Gheit, senior oil analyst at Oppenheimer & Co.

Crude oil for November delivery rose 48 cents, or 1 percent, to close at $50.12 a barrel yesterday on the New York Mercantile Exchange. Adjusting for inflation, oil prices are roughly $30 below the peak set in 1981, the Associated Press reported.

Higher crude oil prices are likely to mean higher gasoline and home heating oil prices in the United States.

The average retail price for regular gasoline reached almost $1.92 on Monday, nearly 33 cents higher than the same time last year, the Energy Information Administration said in its weekly report. Gas prices have risen 7 cents in the last two weeks.

The EIA, a branch of the U.S. Energy Department, earlier this week said heating oil is already at record levels and gasoline prices were just below the peak set in mid-May.

“How much and how long retail prices will climb is still uncertain, but this is not a good start to the upcoming winter season for consumers in what was already expected to be a period in which retail prices would be high,” the agency said.

The natural gas industry, in a report released Thursday, predicted a colder than normal winter for most of the East and warmer in the West.

Washington Gas on Thursday said it expects a 2 percent increase in bills from November to April for its one million customers in the Washington area. But the company said that could rise to 25 percent under a worst-case scenario.

Douglas MacIntyre, senior oil market analyst at the Energy Information Administration, said tight oil supplies mean that real or perceived disruptions would have an exaggerated effect on prices.

Hurricane Ivan damaged Gulf of Mexico production two weeks ago. The U.S. Interior Department said 39 of 764 platforms and two of the 117 oil rigs in the Gulf were evacuated because of Ivan, lowering daily production by 28.5 percent as of yesterday.

In addition to hurricane damage, prices rose on speculation that a Russian government dispute with a leading oil supplier, potential rebel attacks on oil facilities in Nigeria, violence in Iraq and instability in Venezuela could crimp supplies to North America, Asia and Europe.

“Oil, it is a commodity that reflects the world situation, the global situation. It has politics, economics, weather. Everything is embedded in it,” Mr. Gheit said.

Prices hit $50 earlier this week in intraday trading, but closed lower after Saudi Arabia promised to increase its oil production capacity.

The world’s largest oil exporter said it would raise its production capacity by nearly 5 percent to 11 million barrels a day in an effort to control prices.

Oil Minister Ali Naimi announced that the capacity increase would come into effect in the next few weeks, using fields where production has just begun, the AP reported.

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