Oil prices fell in the third week of October, chiefly on the news that Hurricane Wilma is likely to bypass the Gulf of Mexico. The news is little comfort to Florida residents but will provide some respite for the beleaguered US crude and refining industry, still reeling from hurricanes Rita and Katrina. Spot Brent was trading at $58.53 a barrel on 19 October, compared with more than $60 a barrel a week earlier.
About 65 per cent of crude and 54 per cent of gasoline production in the Mexican Gulf area remains shut in following the September storms. However, the latest weekly inventory update from the US Energy Information Administration offered some good news. Crude stocks rose by 1.8 per cent to 312 million barrels while gasoline supplies rose by an unexpectedly strong 1.5 per cent to 195.7 million barrels in the week to 14 October. OPEC also hit a bearish note in its latest monthly report, released on 18 October, revising downwards its 2005 demand growth forecast by about 200,000 barrels a day (b/d) to 1.2 million b/d, equating to global demand of about 83.3 million b/d. 'However, with the tight supply and demand balance on the product side, the market is likely to continue to be led by products,' said the report. 'As the market remains sensitive to refinery outages, any further unplanned shutdown or unexpected improvement in demand throughout the winter could allow speculative activity to push prices above the level justified by crude market fundamentals.' Saudi Arabia's King Abdullah said on 15 October said that he agreed that prices were at an unreasonable level, but that Riyadh was doing all it could to provide adequate supply. 'Without a doubt, we have benefited financially, but we believe that the damage to other countries is tremendous and we don't believe that the prices should be at these levels,' he said. 'But there is not much the kingdom can do. Prices are controlled by speculative markets, and competition from emerging markets in Asia is driving our prices up.'