Crude oil passes $54 as demand forecast rises

Mark Shenk

Tuesday, Oct. 12, 2004 | 9:16 a.m.

Crude oil rose to a record for a sixth session, reaching $54.45 a barrel today in New York, after the International Energy Agency said that demand is increasing faster than predicted this year.

Global consumption will jump 3.4 percent to 82.4 million barrels, the adviser to 26 industrialized nations said in a monthly report. The forecast was up 190,000 barrels a day from last month. The Paris-based agency has boosted its demand forecast in all but one month since November 2003. Demand growth will slow next year because of rising prices, the IEA said.

"We're seeing demand increase in all the major economies," said Jason Schenker, an economist at Wachovia Corp. in Charlotte, N.C. "Broad-based economic growth will keep prices rising and we could easily see $60 oil by next summer."

Crude oil for November delivery was up 36 cents, or 0.7 percent, at $54 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Prices reached $54.45, the highest since futures began trading in 1983. Oil futures were up 69 percent from a year earlier. Prices have risen in 17 of the last 19 sessions.

Oil in New York is up 26 percent since Sept. 8, when Hurricane Ivan began to threaten output at platforms in the Gulf of Mexico. The unexpected duration of the shutdowns reduced U.S. pumping in the region by at least a quarter for a month and imports have slowed.

Another storm shut the Louisiana Offshore Oil Port, which handles about 1 million barrels a day, on Oct. 8. While unloading resumed two days ago, the biggest tankers can't discharge until a booster station is repaired, said Mark Bugg, scheduling manager at New Orleans-based Loop LLC, the port operator. The station increases the unloading rate from large tankers.

"Unfortunately, we're not going to be able to run the booster in two to three days like we earlier thought," Bugg said. "It's looking like it will take four to five days."

A general strike in Nigeria, Africa's top oil producer, entered a second day. While some oil workers have joined the strike, their unions say they won't target oil output.

Nigeria, the fifth-biggest supplier of crude to the United States, produced 2.42 million barrels of oil a day last month, according to Bloomberg data. The country's Bonny Light grade is the type of low-sulfur crude oil preferred by U.S. refiners.

"The market is in a state of high anxiety because of the plethora of small supply disruptions," said Jim Steel, director of commodity research at Refco Inc. in New York. The rise in prices "will continue until we get some of these resolved."