Sam Fletcher
Senior Writer
HOUSTON, Aug. 10 -- Crude prices hit new highs Monday with the average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes pushing past $40/bbl for the first time in 20 years, following reports that crude production in southern Iraq was halted because of sabotage threats.
That production supplies Iraq's two export terminals on the Persian Gulf. However, reports early Tuesday said crude shipments that previously had been running at 1.9 million b/d, had only been cut back to 1.1 million b/d.
Previous exports from the Mediterranean port of Ceyhan, Turkey, have long been disrupted because of sabotage to the pipeline transporting crude from the Kirkuk oil fields in northern Iraq.
In another development that is likely to upset world markets, Interfax news agency reported overnight that Russian bailiffs had again frozen the assets of Yuganskneftegaz, the main production subsidiary of OAO Yukos, just days after a Russian court had ruled such a seizure illegal. Russia's Justice Ministry was quoted as saying bailiffs made that move because Yukos hasn't the cash to pay $3.4 billion in back taxes. Yuganskneftegaz accounts for 60% of Yukos's crude production.
Meanwhile, Bonnie, the second named tropical storm of this hurricane season, was located in the Gulf of Mexico about 390 miles south of the mouth of the Mississippi River early Tuesday, moving northwest at 8 mph, with maximum sustained winds of 60 mph. Forecasters expect Bonnie to make landfall early Thursday between the Florida coast and eastern Louisiana. Most of the oil and natural gas production in the Gulf of Mexico is off Louisiana.
A third storm, Charley, was 450 miles south-southeast of Santo Domingo in the Dominican Republic and headed west-northwest near 24 mph, according to the National Hurricane Center in Miami. That storm was expected to strengthen.
Energy prices
The September contract for benchmark US sweet, light crudes closed at a record high of $44.84/bbl, up by 89¢ for the day, after earlier hitting an all-time record of $44.98/bbl Monday on the New York Mercantile Exchange. The October contract jumped by 92¢ to $44.44/bbl on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., gained 90¢ to $44.85/bbl. Heating oil for September delivery climbed by 1.1¢ to $1.1856/gal, while gasoline for the same month increased by 0.54¢ to $1.2401/gal.
The September natural gas contract gained 10.5¢ to $5.69/Mcf Monday on NYMEX, with traders watching two tropical depressions, including one then in the southeastern Gulf of Mexico and another east of the Windward Islands. "But the seasonal threat of hurricanes is to some extent already priced-in, and such threats now carry less weight, given the well-supplied spot market and improved offshore technology," analysts said Tuesday at Enerfax Daily.
In London, the September contract for North Sea Brent crude escalated by 93¢ to $41.56/bbl Monday on the International Petroleum Exchange. Gas oil for August delivery increased by $8.75 to $387.25/tonne. The September natural gas contract inched up by 2.06¢ to the equivalent of $3.92/Mcf on IPE.
The average price for OPEC's basket of seven crudes gained 37¢ to $40.04/bbl Monday, the highest price in 20 years. The all-time record price for OPEC's basket of crudes was $41.80/bbl on Nov. 20, 1980. OPEC's basket price has remained above the cartel's target band of $22-28/bbl since Dec. 2, 2003. This year, that price has averaged $33.28/bbl through Aug. 6, up from an average $28.10/bbl for all of 2003 (OGJ Online, Aug. 9, 2004).
Hussein Kazempour Ardebili, Iran's OPEC governor, said Monday that current high prices for crude are driven by political instability in some exporting countries and market fears for future supplies.
Contact Sam Fletcher at [email protected]
