Sam Fletcher
Senior Writer
HOUSTON, Aug. 2 -- The Aug. 1 death of Saudi Arabia's King Fahd bin Abdul Aziz drove crude futures prices to record highs, despite the smooth succession of his half-brother, former Crown Prince Abdullah bin Abdulaziz al-Saud, to the throne.
Middle East officials hastened to emphasize that no change in Saudi Arabia's oil policy is expected under Abdulla, who had been de-facto ruler of Saudi Arabia since Fahd suffered a stroke in 1995.
Rihab Massoud, the Saudi embassy's charge d'affaires in Washington, DC, told a press conference that Abdullah "will continue King Fahd's legacy on providing the globe with a stable and secure source of energy."
In a press interview in Tehran, Bijan Namdar Zanganeh, Iran's oil minister, predicted that market reverberations from Saud's death would trigger temporary fluctuations in oil prices, with no lasting impact. He noted that Abdullah has been responsible for Saudi oil policy for years.
However, Abdullah is more than 80 years old, as was Fahd. And traders are troubled by the fact that Saudi Arabia is the only major oil exporter with spare production capacity if current supplies are disrupted. Even with members of the Organization of Petroleum Exporting Countries producing at 25-year highs in a struggle to meet world demand, crude prices have increased by 40% this year.
US refinery outages and tensions over Iran's nuclear ambitions also fanned market concerns.
Energy prices
The September contract for benchmark US sweet, light crudes shot up to an all-time record of $62.30/bbl in interday trading Aug. 1 on the New York Mercantile Exchange. That contract settled at $61.57/bbl, up $1 for the day and the highest closing for a front-month contract in the 22 years NYMEX has traded crude futures. The October contract escalated by $1.05 to $62.70/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained $1.01 to $61.58/bbl. Heating oil for September delivery climbed by 4.07¢ to $1.72/gal. Gasoline for the same month was up by 2.1¢ to $1.75/gal.
The September natural gas contract jumped by 26.9¢ to $8.15/MMbtu on NYMEX in expectation that the Energy Information Administration on Aug. 4 will issue another bullish report on US underground natural gas storage. Moreover, said analysts at Enerfax Daily, "Temperatures in New York and Chicago are expected to remain mostly above normal for the rest of this week, with highs topping 90° [F]. The latest National Weather Service outlook for early next week calls for above-normal temperatures for most of the nation."
In London, the September contract for North Sea Brent crude increased by $1.07 to $60.44/bbl on the International Petroleum Exchange. Gas oil for August delivery was up by $9.25 to $534.25/tonne.
The average price for OPEC's basket of 11 benchmark crudes increased by 92¢ to $55.12/bbl on Aug. 1.
Contact Sam Fletcher at [email protected]
