Oil likely to remain aloft - As crises play out, price per barrel may stay over $30
www.chron.com Feb. 7, 2003, 10:48PM Copyright 2003 Houston Chronicle News Services
NEW YORK -- World crude oil prices hit fresh more-than-two-year highs Friday as concerns of a winter fuel supply crunch in the United States combined with mounting rhetoric against oil supplier Iraq and renewed threats against U.S. economic targets.
"Once you get into a panic buying situation, you really never know when it's going to stop," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Traders are concerned that an attack on Iraq, the world's No. 8 oil exporter, could coincide with a crippling strike in Venezuela, to leave supplies dangerously thin during the high-demand winter season in the Northern Hemisphere.
The U.S. Energy Information Administration said Friday that low supplies and troubles in Iraq and Venezuela mean the average price for U.S. crude oil is expected to stay above $30 a barrel for the rest of this year.
That projection is bad news for U.S. heating oil and gasoline consumers.
In addition, it could hinder the recovery of an economy struggling to rebound from recession.
In Texas, the statewide average for a gallon of regular self-serve fuel is $1.49 -- up 6 cents a gallon in only a week, according to the Weekend Gas Watch, compiled by AAA Texas. San Antonio has the least expensive fuel at nearly $1.45 a gallon -- up more than 6 cents in a week, and that's 45 cents more than last year's average of $1 a gallon. Houston and Dallas tied for the most expensive fuel, averaging nearly $1.50 a gallon. Both cities saw increases of nearly 6 cents a gallon.
"The recent increases appear to be the result of panic pricing by retailers on the anticipation of war with Iraq," said Rose Rougeau, spokeswoman for AAA Texas. "In some areas, the price of gas jumped 5 to 10 cents higher within the last couple of days. This move is premature, considering gasoline supplies in the United States are plentiful."
Nationwide this week, the average price of regular unleaded gasoline was $1.53 per gallon, up 11 cents since the year began and 43 cents higher than a year ago.
On Friday at the New York Mercantile Exchange, light, sweet crude for March delivery hit $35.25 a barrel -- the highest level since November 2000 -- before settling up 96 cents at $35.12.
On London's International Oil Exchange, March Brent crude oil hit $32.50 per barrel, also a two-year high, and closed up 90 cents at $32.34.
Heating oil posted a 23-year high of $1.113 a gallon before closing at $1.0957 a gallon, up 6.86 cents on the day.
Fuel suppliers in the Northeast, the world's biggest heating oil market, are seeking an emergency release of U.S. strategic stockpiles to ease shortages as heavy snows hit the region.
March gasoline futures rose 3.87 cents to close at $1.067 a gallon.
And natural gas futures rose 3.7 percent to a two-year high, cracking $6 per thousand cubic feet, also on concern over frigid U.S. weather. Gas for March delivery rose 21.5 cents to $6.043.
The oil rally got under way Wednesday after the Department of Energy reported an unexpectedly large decline in inventories.
Then on Friday, Attorney General John Ashcroft raised the nationwide threat level.
Traders believe an attack on Iraq would halt oil supplies from the producer and could also hit supplies from other Middle Eastern countries, which provide 40 percent of the world's 40 million barrels per day of oil exports.
Even as President Bush presses the case for using force in Iraq, U.S. consumption of Iraqi crude has been rising.
Imports rose 24 percent in January to 1.15 million barrels per day as the U.S. sought new suppliers to offset the loss from Venezuela.
The International Energy Agency, the West's energy watchdog, said OPEC exporters may have enough spare capacity to prevent the need for consumer countries to release strategic reserves in the event of war in Iraq. But if not, IEA Director Claude Mandil said he could order a release of emergency inventories within hours.