By OGJ editors
HOUSTON, Dec. 17 -- Crude oil prices on the New York Mercantile Exchange Monday broke above $30/bbl for the first time in 2 months as a national strike disrupting Venezuela's oil and natural gas industry entered its third week.
The January contract for benchmark US sweet, light crudes gained $1.66 to $30.10/bbl, while the February contract rose by $1.59 to $30.04/bbl.
Paul Horsnell of J.P. Morgan Securities Inc. in London said the Venezuelan situation holds severe implications for NYMEX oil prices because Venezuelan crude supplies 42% of the heavy crude oil for US Gulf Coast refineries.
"The concept of oil as a fungible commodity is helpful in explaining why regional prices move together, and why no country can achieve any insulation from price shocks simply by adjusting the composition of its imports. However, there are limits to how substitutable alternative sources of supplies are, and the potential price impact of the Venezuelan situation is driven by a relative lack of fungibility," Horsnell said.
"Short haul crude is not in the short term substitutable by long haul supplies," Horsnell said, noting that energy security is enhanced by having more reliance on longer haul imports because that gives a market time to make adjustments after a shock.
"A disruption from Venezuela, 5 days sailing away, feeds straight through, while one from the Middle East, 5 weeks sailing away, is more manageable," Horsnell said. The Western Hemisphere has been prone to supply interruptions this year with two from Venezuela and one from Nigeria.
Refined products futures prices also closed sharply higher on NYMEX. Unleaded gasoline for January delivery rose by 3.90¢ to 87.85¢/gal. Heating oil for the same month climbed by 4.08¢ to 85.64¢/gal.
The January natural gas contract gained 5.7¢ to $5.34/Mcf on NYMEX.
In London, the January contract for North Sea Brent oil soared by $1.17 to $28.38/bbl on the International Petroleum Exchange. The January natural gas contract climbed by 1.785¢ to the equivalent of $3.98/Mcf on IPE.
The average price for OPEC's basket of seven benchmark crudes increased by 99¢ to $28.61/bbl Monday.
