Storm sweeps in oil recordStorm sweeps in oil record
Wednesday August 24, 3:37 PM EDT
NEW YORK (Reuters) - Oil prices surged more than 2 percent to set a record on Wednesday, after an unexpectedly large drop in U.S. gasoline stocks added to worries that a gathering storm in the Atlantic could damage U.S. oil production platforms.
News Iran's parliament had thrown out the new president's choice for oil minister added to the market's uncertainty and drew a big question mark over oil policy in OPEC's second-biggest producer.
U.S. crude settled at $67.32 a barrel, up $1.61, shortly after hitting $67.40, the highest level in 22 years of oil futures trade on the New York Mercantile Exchange. Oil hit its previous record, $67.10, earlier this month. London Brent settled $1.36 higher at $66.01 on the International Petroleum Exchange.
U.S. data released Wednesday morning showed gasoline inventories in the world's biggest energy consumer tumbled 3.2 million barrels last week, or nearly 2 percent, with two weeks of the peak U.S. driving season to go.
"The gasoline draw is a bullish number, without doubt. The decline was much bigger than the 1.1 million barrels draw the Street was anticipating," said Jim Ritterbusch, analyst at Ritterbusch and Associates.
The market was also watching Tropical Storm Katrina gather strength over the Bahamas and take aim at Florida's southern tip and the oil-producing Gulf of Mexico, which accounts for up to a quarter of U.S. oil output.
"The peak period for hurricanes is usually from August to September, so the oil market is concerned about the risk of weather-related production losses over the coming weeks," said Kevin Norrish of Barclays Capital.
U.S. crude stocks rose 1.8 million barrels last week, contrary to analyst forecasts for a fall. Heating oil supplies built, as anticipated, ahead of the winter.
$50 OIL IN 2006
Assurances by top exporter Saudi Arabia that it would pump as much oil as its customers need failed to take the sting out of a rally that has lifted oil toward the inflation-adjusted $82 a barrel of 1980, the year after the Iranian revolution.
And there is no sign of a let-up next year. Analysts polled by Reuters predicted for the first time on Wednesday that prices would breach $50 a barrel in 2006.
The perceived vulnerability of supply lines is a major factor supporting prices.
Crude oil exports from Iraq's southern Basra terminal resumed late on Tuesday, after a power cut earlier in the day.
In Ecuador, which mostly supplies crude to California, output was still down to around 80 percent of its 530,000-bpd level after attacks on oil infrastructure last week.
Traders were also watching for any disruption in Nigeria, the world's eighth-largest crude exporter, after the state pricing agency instructed the national oil company to recover costs on sales, implying consumer prices are set to rise dramatically. Previous fuel hikes have led to general strikes.
With some production in the UK North Sea and India already offline, dealers worry that the Organization of Petroleum Exporting Countries is pumping flat out and would strain to make up any unexpected outages.
©2005 Reuters Limited.