Oil market weathers US hurricane

10 September 2004
Oil prices spiked and dipped in the second week of September as fears of hurricane damage to US oil facilities rose then faded. More violence and sabotage in Iraq lent support to the market while OPEC's most outspoken minister changed his line on global undersupply. Spot Brent was trading at $41.42 on 7 September, compared with $40.96 a week earlier.

The news of the previous week, when Turkey's Tupras signed the first term contract with Iraq to lift crude from the northern Ceyhan-Kirkuk export pipeline, appeared almost too good to be true. So it proved on 2 September, when saboteurs once again forced the closure of the beleaguered line. Further attacks followed on 5-6 September, with repairs due to take about a week. An Oil Ministry spokesman said that there were now 14,000 security guards deployed to guard Iraq's hydrocarbons infrastructure.

Crude prices rose on 4-5 September over fears that Hurricane Charley would damage oil platforms along the US Gulf coast. However, with the exception of a small amount of shut-in production, the facilities escaped harm. The Labour Day holiday on 5 September delayed the publication of US supply data. The long weekend traditionally marks the end of the summer driving season.

New trouble emerged in early September for Russian oil giant Yukos, in the form of the seizure by the Tax Ministry of $2,700 million from its accounts without, according to the oil company, proper court approval. Yukos is involved in a dispute with the tax authorities over billions of dollars worth of back taxes, raising fears that crude production could be threatened. Speculation is growing that Moscow is aiming to force the sale of Yukos' Siberian unit, which accounts for 60 per cent of output, in order to bring it back under the state umbrella.

OPEC President and Indonesian Energy Minister Purnomo Yusgiantoro on 6 September departed from his recent mission to talk up the oil price, during which he has repeatedly questioned world spare capacity. Speaking at a conference in Sydney, he said that the world market was oversupplied by about 1.5 million barrels a day and that only the political premium was keeping prices at the highs of the past few months. OPEC meets in Vienna on 14 September to discuss altering current production quotas and adjustment of the $22-28-a-barrel target price band.

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