Sam Fletcher
Senior Writer
HOUSTON, July 14 -- Crude oil prices soared to new heights above $76/bbl July 13 as Hezbollah guerrillas fired rockets from Lebanon into Israel after Israeli forces bombed Beirut International Airport and other targets.
"Although neither Lebanon nor Israel produces any material quantity of oil, the fighting provokes fear that the struggle will spread to nearby oil-rich and volatile regions," said analysts in the Houston office or Raymond James & Associates Inc. "Iranian President Mahmoud Ahmadinejad admonished against a possible Israeli strike on Syria, saying that any attack would be construed as an act against the Islamic world." Both Iran and Syria support Hezbollah militants (OGJ Online, July 13, 2006).
"These tumultuous affairs, along with continued attacks in Nigeria, may keep oil prices up for some time," Raymond James analysts said.
A Nigerian newspaper reported July 13 that rebels attacked two pipelines in that country, triggering the possible loss of 120,000 b/d of crude production. However, Italy's Eni SPA, whose Nigerian subsidiary operates those facilities, later denied that there had been any attack. Although it did not explain the cause of damage, the company claimed resultant losses were minor and repairs will be made soon.
The US and its allies resolved to refer their dispute over Iran's nuclear research to the United Nations Security Council. The US, the UK, France, Russia, and China are the five permanent members of that council. President Ahmadinejad again threatened to end Iran's cooperation with the UN.
The Organization of Petroleum Exporting Countries said July 14 it is concerned about the recent spike in crude prices but blamed "geopolitical developments, over which OPEC has no influence." It said crude supplies "well in excess of demand" continue to enter the market, and inventories of stocks among member countries of the Organization for Economic Cooperation and Development are above 5-year average levels. "This healthy state of the upstream sector has been very much due to OPEC's abiding commitment to market stability, with prices at fair and equitable levels," officials said.
Energy prices
The August contract for benchmark US light, sweet crudes hit an all-time high of $76.85/bbl for a front-month contract during intraday trading July 13 on the New York Mercantile Exchange. Its closing price also was a record, $76.70/bbl, up by $1.75 for the day.
The price continued climbing to $78.40/bbl in electronic trading after the market closed. The September contract escalated by $2.18 to $78.24/bbl during the regular trading session. Heating oil for August delivery jumped by 6.15¢ to $2.08/gal on NYMEX. Regular gasoline for the same month gained 4.54¢ to $2.30/gal.
The August natural gas contract advanced by 34.7¢ to $6.13/MMbtu, following the climbing price for crude. The US Energy Information Administration reported the injection of 89 bcf of gas into US underground storage during the week ended July 7. That report "was bearish on a near-term basis, and inventories are now flat with last year," Raymond James analysts said. "However, demand destructed from last year's hurricanes and high prices is returning, so on a 4-week moving average, inventories are actually 1.1 bcfd tighter than they were last year at this time," they said.
In London, the August IPE contract for North Sea Brent jumped by $2.30 to a record $76.69/bbl for that market. Gas oil for August delivery shot up by $23.50 to $659.75/tonne.
The average price for OPEC's basket of 11 benchmark crude increased by $1.72 to $70.38/bbl on July 13.
Contact Sam Fletcher at [email protected].