Crude Rises 48 Cents to $38.11 A Barrel After Key Refinery Shuts Down

Reuters News Service

June 22, 2004

NEW YORK -- Oil prices rose today after the shutdown of a gasoline-making unit at a key refinery threatened to tighten supplies in the early days of the U.S. summer driving season.

The fuel production glitch added to concerns over stalled Iraqi oil exports after sabotage attacks last week and a Norwegian oil workers strike.

U.S. benchmark crude ended at $38.11 a barrel, up 48 cents, or 1.2 percent, and London Brent was up 48 cents at $35.60. Both U.S. and London crude fell more than $1 on Monday.

U.S. prices have slipped from early Junes 21-year highs above $42, although prices are still up more than 16 percent in the year to date.

The news of an outage at the ConocoPhillips refinery in Lake Charles, La. overcame bearish concerns that U.S. petroleum supply will show a rise when the U.S. government issues weekly data Wednesday.

Tuesday afternoon, sources said the Lake Charles plant was forced to delay the restart of a shut gasoline-making unit that has taken gasoline out of the strained U.S. supply chain. There was no immediate word when the plant would return to service, which re-ignited concerns over gasoline supplies during the summer U.S. driving season.

Gasoline pump prices have fallen in the past four weeks by 13 cents a gallon to about $1.94 a gallon, the U.S. government said on Monday. Still, at $1.94 a gallon for self-service regular gasoline, prices are 44 cents higher than this time last year.

U.S. gasoline futures traded in New York rose 3.74 cents a gallon, or 3.2 percent, today. This erased a similar loss shown on Monday.

The U.S. governments Energy Information Administration releases weekly stocks data on Wednesday. An average of analysts forecasts shows expectations of a 1-million-barrels build in crude supplies, along with a gasoline stocks rise of about 1.5 million barrels, a Reuters survey found.

Iraqs efforts to ramp up oil exports following a six-day stoppage faltered after it halted crude loadings from a small Gulf terminal.

Officials hoped to return southern exports to normal levels of around 1.8 million bpd within a few days after resuming some exports on Monday following repairs to sabotaged pipelines.

But loadings at the Khor al-Amaya terminal were brought to a halt again almost immediately.

"Stability in Iraq holds the key to oil price movements over the rest of the year. The expectation has shifted from one of growing Iraqi production to concerns about maintaining supplies at recent levels," said London-based Centre for Global Energy Studies in a report.

"If Iraqi production is kept relatively steady over the coming months with occasional, but temporary, sabotage slowing exports, we can expect prices to ease slowly from their recent heights."

In Norway, where oil workers striking over pension rights and temporary labour, a five-day protest has cut out 375,000 barrels per day of output.

Another 80,000 bpd of supply is likely to close from late Wednesday, according to field operators, if the strike continues that long.

Most oil price pundits expect prices to moderate from current 21-year peaks next year and to fall further by 2010, assuaging fears that crude is in a new high-price era, a Reuters poll found on Tuesday.

A survey of 14 analysts and consultants forecasts that U.S. crude prices will slip to $30.12 a barrel next year, down 18 percent from a $36.77 average so far in 2004, on course to be the highest level since 1980.

Eight analysts with projections for 2010 on average forecast U.S. crude at $26.81 a barrel, down from a mean of $29.22 so far this decade, though a marked increase on the post-1990 average of $22.68.