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Oil shoots up as Ivan hits US shores
World oil prices rose on Thursday as Hurricane Ivan reached the US Gulf Coast, having shut more than 1 million barrels of daily output in the Gulf of Mexico and 13 percent of refining capacity in the United States.
US light crude climbed 51 cents to a peak at US$44.09 a barrel, while London's Brent crude gained 42 cents to US$40.77 a barrel.
Ivan, one of the fiercest Atlantic hurricanes on record, began to batter US shores along a 400-mile stretch of the Gulf of Mexico coast.
Oil companies have shut roughly 1.3 million barrels per day (bpd) of offshore crude output in the gulf, home to 25 percent of US oil and gas production. Gas production was also reduced as thousands of workers were evacuated from platforms and rigs.
More than 1.5 million bpd of refining capacity along the coast was shut as a precaution with eight plants fully closed and four running partial operations, and the US Coast Guard stopped operations at six ports in Alabama, Florida and Mississippi.
"People are probably buying in case there's substantial damage," said Tony Nunan at Mitsubishi Corp. in Tokyo.
"When you're dealing with a finely balanced market, oil that isn't being produced and going into tanks is viewed as being lost for good."
The US government Energy Information Administration (EIA) on Wednesday reported a drop in national crude stocks of 7.1 million barrels in the week to Sept. 10, almost four times bigger than the market forecast of a 1.9 million-barrel fall after a string of storms in recent weeks delayed import deliveries.
The decline, the seventh in as many weeks, left commercial crude tanks at 278.6 million barrels, 3 million below levels a year ago and the lowest since late February.
"However, unless storms continue to wreak havoc with Gulf Coast shipping... all the tankers waiting to offload their crude oil will eventually make it to their respective ports and we would see high amounts of imports and a build in crude oil inventories after the storms have passed," the EIA said.
The EIA data showed key winter heating oil stocks rising 1.7 million barrels, while gasoline inventories fell 1.6 million barrels.
Oil prices, running just US$5.31 below an all-time peak at US$49.40 for US crude, found little relief from OPEC's latest agreement to increase its official output limits by 1 million bpd.
The decision means little for real supply to the market as the Organization of the Petroleum Exporting Countries was already pumping 2 million bpd above the previous production ceiling of 26 million bpd. |
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