- The Washington Times - Monday, September 20, 2004


Oil prices advanced to their highest level in a month yesterday, surpassing $46 a barrel, as supply constraints in the United States and Russia tested the nerve of a market already edgy about the world’s limited production capabilities and rising demand.

Cash-strapped Russian oil giant Yukos said it would halt some oil exports to China, while U.S. petroleum inventories are expected to decline again this week because of production, refining and shipping delays caused by Hurricane Ivan.

Neither factor is itself a punishing blow to the global supply chain, analysts said, though each is enough to test the nerves of traders already worried there might not be enough excess output capacity to handle a more serious, prolonged disruption.

Light crude for October delivery was up 76 cents to $46.35 per barrel on the New York Mercantile Exchange. In London, Brent crude for November delivery gained 46 cents to $42.91 per barrel on the International Petroleum Exchange.

While workers who had been evacuated from oil production platforms and refineries in and around the Gulf of Mexico last week are returning to work, analysts are uncertain about just how long it will take for output and shipments to resume normal levels.

About 7.8 million barrels of oil production in the Gulf of Mexico have been cut off since Sept. 13, according to the federal Minerals Management Service. That is equivalent to 1.3 percent of total annual production in the region.

As of yesterday, daily oil production in the Gulf was still 41 percent below normal, while natural gas production was down by 24 percent. The region accounts for roughly one-quarter of all the oil and natural gas used in the United States.

Analysts expect government oil inventory data, to be released tomorrow, to show sharp declines for the second week in a row. Last week, the nation’s available supply of oil fell by more than 7 million barrels, bringing inventories to 278.6 million barrels, or about 1 percent below year-ago levels.

Still, past experience suggests that hurricane-related supply interruptions are often short-lived. In its weekly oil market commentary, the Energy Department said last week that it expects to see weekly supply data rebound once tankers that were delayed make their deliveries.

Oil markets were also buoyed yesterday by Yukos’ announcement that it would suspend roughly 100,000 barrels per day of oil exports to the Chinese National Petroleum Corp. because it cannot afford to pay the rail-transportation expenses.

While the export reduction was tiny and could easily be replaced by another Russian company, analysts said the development was having a psychological effect on global oil markets, which have been strained by strong demand amid tight supplies.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide