US crude prices tipped over the $60-a-barrel mark into new territory on 6 July as hurricane threats in the Gulf of Mexico added a feverish edge to trading. Prices have been climbing steadily since late June, on the back of market concerns about a shortfall in refining capacity ahead of peak season demand in the fourth quarter.
As MEED went to press on 7 July, sweet crude for August delivery reached $61.63 on the New York Mercantile Exchange, while in London, Brent August futures opened at a record $60.04 a barrel. Both spikes came in response to minor and temporary power outages caused by one tropical storm and were expected to soften as it continued to weaken on its journey inland. However, hard on its heels comes Tropical Storm Dennis, which US weather forecasters predicted would move into the Mexican Gulf on 9-10 July and possibly attain hurricane status - oil producers evacuated 85 production platforms and 11 drilling rigs, the US' Minerals Management Service said on 7 July. Traders fear a repeat of last year's Hurricane Ivan, which damaged oil facilities and caused others to shut down for months. Underlying the febrile market atmosphere is more reassuring data released in late June which showed an unexpected rise in both crude and product stocks. However, the long-term outlook for the global supply/demand balance remains poor, with Saudi officials saying in early July that OPEC will be unable to meet projected western demand in 10-15 years. The International Energy Agency has also said the world will need the organisation to boost its production from 30 million barrels a day (b/d) to 50 million b/d by 2020 to meet rapidly rising demand. The comments came in advance of the G8 summit in the UK, where high oil prices were expected to be one of the main topics of discussion.