oil hits a new record hi
Oil sets new record at $58.60
By Bernie Woodall
Reuters
Friday, June 17, 2005
NEW YORK (Reuters) - Oil prices set a new record of $58.60 a barrel on Friday, after the United States and other Western nations shut consulates in oil-producing Nigeria following a terrorist threat.
Concerns about the ability of U.S. refiners to cope with strong U.S. demand, despite rising fuel costs, also helped propel prices above the record of $58.28 set in April.
U.S. crude hit the record near the end of Friday's trading session on the New York Mercantile Exchange.
In London, Brent crude also hit an all-time high of $57.95 a barrel on the International Petroleum Exchange, breaking the former record of $57.65 set in April.
U.S. crude settled at $58.47 a barrel, up $1.89. Brent settled at $57.76 a barrel, up $1.54.
The new records are for nearest-month futures, which are July delivery for U.S. crude and August delivery for Brent. U.S. December crude futures hit a record of $60.40 a barrel, the all-time high for any monthly contract.
Worries about security of supply were highlighted by the closure in Nigeria of the U.S., German and British consulates in Lagos, after a warning of a terrorist threat.
Nigeria is the world's eighth-largest crude exporter and the fifth-biggest exporter oil to the United States. Its exports to the United States have risen to 1.1 million barrels per day in the most recent government statistics -- about 10 percent of U.S. crude imports.
While there was concern about Nigeria as an oil source, the country continued to produce and export crude on Friday.
U.S. authorities shut their consulate after a threat involving foreign Islamic militants, U.S. military and diplomatic sources said.
Intelligence information from foreign Islamic militant channels indicated a specific threat to the U.S. presence in Nigeria and its Lagos consulate, a diplomatic source said.
Nigeria has been named by Islamic militant leader Osama bin Laden as a candidate for "liberation" and the United States said last month it had uncovered links between his al Qaeda network and Nigerians.
In a survey of industry executives this week in Boston, more than half considered "political upheaval in a strategic country" as the most likely cause of a disruption in oil supply.
DEMAND STRENGTH
Demand strength also supported prices.
U.S. data this week showed brisk consumption of transport fuels, renewing concerns about refiners' ability to meet peak summer gasoline demand and to build heating OIL and diesel FUEL inventories for later in the year.
"There's still high demand, despite the fact that oil's been quite expensive," said Sam Tilley, head of research at brokerage Sucden UK Ltd. "If there is bigger demand than currently, especially later in the year, will the refineries be able to handle it?"
Demand for gasoline over the past four weeks is up 3 percent from a year ago, while consumption of distillates -- diesel, heating oil and jet fuel -- has risen by 6.5 percent, U.S. government data showed this week.
The strength of demand in the face of high prices has surprised some analysts, but a recent study showed that U.S. retail fuel prices have not risen as much in the past 20 years as many other consumer goods have.
While gasoline is up 67 percent since 1984, all consumer goods are up 92 percent, according to the study by consultancy John S. Herold.
"Even for unleaded regular selling for well over $2 a gallon, gasoline expenditures represent less than 15 percent of the average yearly cost of operating a full-size passenger car," the study said.
U.S. crude inventories are 9 percent up year-on-year. But dealers are worried that spare world production capacity is limited now to heavy-sulfur crude from Saudi Arabia, which needs the type of advanced refinery technology that is already fully employed.
The Organization of Petroleum Exporting Countries this week agreed to raise its production limits by 500,000 barrels per day from July, and put another 500,000 bpd on the market soon if prices remained high.
But Saudi Arabia, the only OPEC member with significant production capacity to spare, said it is already meeting demand for as much as it can sell.