Crude oil jumps to record level

Mark Shenk

Tuesday, Oct. 5, 2004 | 9:23 a.m.

Crude oil prices surged to a record in New York and London today on concern that hurricane damage to production platforms in the Gulf of Mexico will keep supplies from rising enough to meet winter needs.

The United States pumped 28 percent less oil than normal Monday in the Gulf because of damage related to Hurricane Ivan, which made landfall three weeks ago, the government said. Supplies of distillate fuel, which include heating oil and diesel, probably fell 1 million barrels last week, according to the median of forecasts by 13 analysts before an Energy Department report.

"The lingering storm damage coupled with cooler temperatures are going to weigh on heating-oil supplies," said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. "We're starting to despair that inventories won't build fast enough to meet heating needs this winter."

Crude oil for November delivery was up 89 cents, or 1.7 percent, at $50.75 a barrel on the New York Mercantile Exchange at 10:18 a.m. Prices reached $50.99, the highest since futures began trading in 1983. Oil futures were up 67 percent from a year earlier.

In London, the November Brent crude-oil futures contract was up 81 cents, or 1.8 percent, at $47 a barrel on the International Petroleum Exchange. Brent reached $47.15 a barrel, the highest price since the contract began trading in 1988.

U.S. heating-oil stockpiles in the week ended Sept. 24 were 9.7 percent below the average for this time of year in the last five years. The U.S. Energy Department will publish its report on last week's fuel inventories Wednesday.

Heating oil for November delivery was up 1.79 cents, or 1.3 percent, at $1.4035 a gallon in New York. Futures reached a record $1.4066.

Oil prices reached a close of $50.12 a barrel Friday on concern the damage in the Gulf of Mexico and threats against production facilities in Nigeria would reduce global supplies. Demand is at a record this year, with the biggest consumption increases in the U.S. and China, which together consume a third of the world's crude oil.

Royal Dutch/Shell Group's venture in Nigeria will probably keep a ban on moving staff and equipment on waterways in parts of the Niger River delta this week because of security concerns, a company spokesman said. Nigeria was the fifth-biggest supplier to the U.S. during the first seven months of the year, according to the Energy Department.

Shell, Nigeria's biggest producer, decided to maintain the travel restriction after reviewing it Monday, spokesman Bobo Brown said by telephone from Port Harcourt. Shell is also considering boosting inland production to compensate for the shutdown of 30,000 barrels a day of output last week, he said.

The 308 Shell staff evacuated last week from the Soku and Ekulama areas in the delta haven't yet returned to work, Brown said. Shell may raise output from other oil fields to make up for the shutdown of two flow stations since last week, he said.