No stopping oil prices OIL PRICES

15 October 2004
Oil prices continued their inexorable rise in mid-October, as continued disruption to the US refining market coincided with supply threats around the world to the light, sweet crude in heaviest demand. Spot Brent was trading at $50.43 a barrel on 13 October, compared with $48.37 a week earlier.

The dislocations caused by September's Hurricane Ivan are taking a considerable time to heal, with remedial efforts at rigs and pipelines hampered by continuing bad weather in the Gulf of Mexico. Some facilities are expected to take up to three months to repair. The release of the latest US inventory data, due on 13 October, was delayed due to Monday's Columbus Day holiday, but the anticipated crude build should ease prices.

In the lead-up to publication of the figures - which have provided a major price support for several weeks - the market signals were pessimistic. On 8 October, Ali Rodriguez, the president of Venezuela's state oil company Petroleos de Venezuelas (PDV), confirmed what most analysts had suspected - that there was little hope of the country's output being raised in the short term. 'The problems we had with the strike [at PDV in late 2002] - the attack on the oil industry - slowed down the process of increasing capacity,' he said in a televised interview. Rodriguez claims that Caracas is meeting its 3.1 million-barrel-a-day (b/d) OPEC quota, but most estimates put output much lower. The potential for international investment to ease the shortfall was not helped by an 11 October announcement by President Chavez that royalties on foreign oil companies were to be increased.

On the same day, Nigerian unrest flared up again, following on from the early October threat by a rebel group in the Niger Delta to target foreign oil workers. A general strike over fuel price rises began, and, while causing no actual damage to output, created an extra shudder in world markets. The difficulties of operating in the country were simultaneously highlighted when the Royal Dutch/Shell Group announced that 20,000 b/d of production had been shut in due to pipeline sabotage.

Kuwait's Energy Minister Sheikh Ahmed Fahd al-Sabah, speaking on 13 October, denied any shortage of oil and lack of spare capacity. 'My message to the world is that there is no shortage, there'll be no shortage, and we are willing to meet demand as it rises,' he said.

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