Hurricane season to whip up oil price
AS TRADERS returned to their screens in the US last night after the
Independence Day holiday, experts were predicting the price of oil
could reach $US80 a barrel during the current hurricane season.
Crude oil traded near a nine-week high in New York amid signs that
near-record prices have yet to slow consumer demand for petrol in the
US during the peak summer driving season.
Crude for August delivery was at $US73.73 a barrel in after-hours
electronic trading on the New York Mercantile Exchange yesterday,
after earlier reaching $US74.18 a barrel.
Brent crude closed near its all-time high in London on Tuesday
night at $US72.51 as storm fears in America, uncertainty over Iran's
nuclear program and high seasonal demand during the US summer put a
squeeze on an already tight market.
Deborah White, an analyst at Société Générale, said: "The market
pause is over. The bull run on commodities has restarted and the
hurricane season lies ahead."
With another active hurricane season forecast this year, SG
predicts the weather will cause losses this year of 33 million barrels
of oil, plus the equivalent of 25 million barrels of gas, and further
losses of refined products.
"The triple whammy would certainly send crude heading through the
$US80 mark toward our technical target of $US83 a barrel," Ms White
said.
There is an 80 per cent chance the hurricane season will be more
severe than average this year, the National Oceanic and Atmospheric
Administration has said. Last year storms temporarily knocked out 75
per cent of offshore oil and natural gas production on the Gulf coast
and sent the prices of oil and gas soaring.
Rising temperatures in the Atlantic Ocean help to fuel the
hurricane season, which usually peaks between mid-August and
mid-September.
The market is badly placed to handle any further disruption to
supplies. Last week the US Energy Information Administration said
crude oil stockpiles had fallen by 3.3 million barrels in a week and
petrol reserves by a million barrels as an estimated 40 million
Americans prepared to take to the road for the holiday weekend.
The price of petrol in the US has risen by 6.5 per cent over the
past week to a seven-week high of $US2.93 a gallon, close to its
record of $US3.05. Demand is traditionally highest in the summer
season, which starts with the Independence Day celebrations.
Refineries in the US are running at less than 93 per cent capacity,
processing half a million barrels a day less than a year ago. But
demand is running almost 1 per cent higher than at the same point in
2005. Ms White said the dovish tone of the Federal Reserve statement
last Thursday, which indicated a likely pause in the interest-rate
tightening cycle, was "the critical factor, reigniting the bullish
mood on commodities".
A renewed rise in the oil price would add to the pressures on
businesses around the world. A report by accountancy firm BDO Stoy
Hayward said British companies were facing additional costs of £11.3
billion ($28 billion) due to this year's $US20-a-barrel rise in the
price of oil.
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