Oil prices fell sharply Friday as Tropical Storm Arlene moved into the Gulf of Mexico with minimal impact on production.
Arlene, the hurricane season's first named storm, forced oil and gas companies to evacuate workers from offshore rigs and to shut in some production. In pushing oil prices lower, traders were betting that production would return to normal levels by tomorrow.
Friday's late selling was "in anticipation that by Monday, the remnants of the storm will be somewhere over the Midwest and that production will be getting back to normal in the Gulf of Mexico," said Tim Evans, senior analyst at IFR Markets in New York.
Crude oil futures for July delivery on the New York Mercantile Exchange fell US$0.74 to US$53.54 a barrel after rising as high as US$54.95 a barrel.
Among petroleum products futures, gasoline futures performed the worst. Gasoline for July delivery slid US$0.0278 to US$1.5436 a gallon. Heating oil for the same month finished with a more modest loss of US$0.0182 to US$1.6074 a gallon. Heating oil futures had spiked briefly on news that a snag at Sunoco's Philadelphia refinery had affected the refinery's distillate output.
Prices were extremely volatile throughout the session amid uncertainty about Arlene. The National Hurricane Center's warning on Friday morning that the storm could gain hurricane strength before making landfall helped send prices sharply higher.
But private forecasters later said that chances of Arlene becoming a hurricane were very small, and that Arlene would most likely make landfall as a tropical storm. Weather2000 said that there was a 90 percent chance that Arlene would make landfall east of New Orleans.
Gulf of Mexico operators, meanwhile, conducted routine evacuations of workers from offshore platforms.
Thus far, Arlene has shut in a known 77,800 barrels a day of oil, or 5 percent of Gulf of Mexico production, companies said. A number of companies have shut production but haven't specified the affected volumes, so the true tally is higher.
The known total production outage could rise to 9 percent of Gulf output, as Chevron Corp said it expects to shut 50,000 barrels a day in output by closing down its massive Petronius platform later Friday, Dow Jones Newswires reported.
About 1.5 million barrels of oil is produced each day in the Gulf, about a quarter of the US total, according to the Interior Department's Minerals Management Service.
Despite its limited impact, however, Arlene provided a taste of what could be lying in store during this year's hurricane season, which is expected to be more active than usual. With global oil production stretched to the limit and demand on the rise, traders are worried that any output disruption could cause a supply shortage, sending prices to new record highs.
Last September, Hurricane Ivan knocked out pipelines and platforms in the Gulf, cutting into oil and gas production for several months. The resulting drop in oil inventories helped lift oil prices to a record high within weeks.
Contributing to the decline in commercial inventories last year was a dogged effort by the Bush administration to fill up the US' strategic petroleum reserves, according to some industry analysts. On Friday, Energy Secretary Samuel Bodman said the government will stop sending crude to the Strategic Petroleum Reserve in August when the stockpiles reach their target of 700 million barrels.
The move could make a small contribution to easing oil-market concerns of a supply crunch as it will free up more than 75,000 barrels a day of crude that can be sold on the open market. But the total amount is just a tiny part of a global 84 million-barrels-a-day market.
On Thursday Bodman said the US wants the Organization of Petroleum Exporting Countries (OPEC) to increase its oil production when it meets next week in Vienna.
"Obviously, we would encourage, have encouraged and will encourage increases in production to the extent that it's possible," he said. "We are in relatively constant touch with the producers, the ministers from both OPEC and non-OPEC nations."
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)