LONDON - Crude oil pushed back through the $54 threshold on Thursday after a pipeline explosion in Mexico
stirred supply fears ahead of a key U.S. crude inventory report.
A continuing strike in Africa's largest producer, Nigeria, also affected prices as traders waited anxiously
for the U.S. crude and heating oil inventory data, likely to show a fall in distillate stocks as time runs out
to build a surplus ahead of the expected cold winter months ahead.
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Oil for November delivery went as high as US$54.20 per barrel during trade on the New York Mercantile
Exchange's after-hours dealing system, up 56 cents from its final price of US$53.64 in New York on Wednesday.
After easing slightly, crude again edged through the US$54 barrier, sitting at US$54.04 at 1200 GMT. It
reached an all-time high of US$54.45 earlier this week.
Brent for November delivery on London's International Petroleum Exchange was up 25 cents to US$50.30 per
barrel. The November contract expires Thursday.
Brent for December delivery was up 34 cents at US$49.62.
OPEC president Purnomo Yusgiantoro said it was demand, not a supply shortfall, that was spiking prices.
"Oil prices will continue to rise through the end of October because demand is robust," said
Yusgiantoro, Indonesia's oil minister.
OPEC's pledges to boost production to around 30 million barrels per day have largely failed to cool prices
as traders say the type of crude made available - with a higher sulfur content - is not desirable at this time.
Since August, the price of oil has risen nearly US$10 - hitting fresh highs nearly every
week.
"The Nigerian strike is in its fourth day, pushed it to the US$54 mark over the last couple of days. ... We
won't see it dip much below US$52," ANZ Bank energy analyst Daniel Hynes said from Melbourne, Australia.
While oil prices are more than 60 percent higher than a year ago, they are still around US$27 below the peak inflation-adjusted
price reached in 1981.
"I find it hard to see how prices can push so high, when the actual data coming through suggests that things
aren't as bad as the market thinks it is," said Hynes. "It seems to be really playing on expectations
of a shortage," he said, adding that there wasn't really one yet.
But the world's excess capacity, or surplus, hovers at just about 1 percent of the world's daily diet of 82 million
barrels of crude on the back of a dramatic rise in demand from China and India this year.
The Paris-based International Energy Agency predicts world consumption will increase by another 2 million barrels
daily in 2005.
Energy analyst Simon Wardell, from World Markets Research Center, said there is little sign that crude prices will
ease in the short term with little or no new oil coming onstream to help boost global supply.
However, he added that crude inventories are not yet critically low.
"There is no question the balance is tight, but it may not be tight enough to warrant these prices,"
he said.
A 76-centimeter (30-inch) oil line exploded in eastern Mexico on Wednesday, according to local officials. Enrique
Fonseca, a spokesman for the Veracruz state civil defense agency, said workers from the government oil company
Petroleos Mexicanos, or Pemex, had closed off the line and were trying to contain the spilled oil.
It was not immediately clear what the extent of damage was to Mexican production but it was enough to send shock
waves through an already jittery market.
Weekly data from the U.S. Department of Energy could see a fall in heating oil stocks, but could
also show a slight increase in crude supplies - now sitting just above 270 million barrels in reserve - ahead of
the Northern Hemisphere winter months.
On Thursday, Nymex heating oil prices continued their upward trend, up US$0.0104 at US$1.5095 per gallon (3.8 liters)
in Asia.
U.S. crude supply has been severely affected by Hurricane Ivan, which tore through the Gulf of Mexico in mid-September.
Around 19.4 million barrels of crude has been shut in, and production down by nearly 28 percent since Ivan, the
U.S. federal Minerals Management Service said.
Meanwhile, tensions between striking oil workers and the Nigerian government rose on Wednesday, with the president
of the largest oil workers' union, NUPENG, vowing to turn off the spigots if authorities used heavy-handed tactics
to end the protest.
"If there are arrests, we will change our strategy. ... We can move to stop operations 100 percent,"
Peter Akpatason said.
Nigeria, the world's seventh-largest oil exporter and the fifth-biggest source of U.S. oil imports, pumps out 2.5
million barrels of oil daily.
Both Nigeria and the Gulf of Mexico produce low-sulfur content crude, particularly desirable for refiners and in
high demand currently.
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Associated Press Writer Yeoh En-Lai in Singapore contributed to this report.
