Sun, Aug 27, 2006 - Page 10 News List

Oil soars as storm spooks traders

NEBULOUS THREAT Brokers' experiences last year led to jittery trading as a tropical depression headed for the Gulf of Mexico, while Iran did nothing to ease their nerves


A relatively weak storm hundreds of kilometers south of Puerto Rico captured the attention of energy traders on Friday, sending oil and natural-gas prices higher on fears that it could strengthen and threaten Gulf of Mexico production by next week.

Large oil producers operating in the Gulf of Mexico said they were prepared to evacuate nonessential personnel should that become necessary. World energy markets also remained focused on Iran's stand-off with the West over its nuclear program.

Oil prices fell earlier in the week after weekly US Department of Energy data showed a rise in gasoline stockpiles. Heading into the weekend, though, traders seemed nervous about the possibility that a tropical depression could look more menacing by next week. It was moving west at about 25kph and was expected to become Tropical Storm Ernesto later on Friday.

The system was expected to enter the Gulf of Mexico in about five days, but forecasters said it was too early to tell where exactly it was headed and how strong it would be. Most offshore oil and natural-gas facilities are located in the eastern and central Gulf.

"The threat is, at best, nebulous, but memories are still raw from last year's storm damage," Fimat USA broker Mike Fitzpatrick wrote.

BP PLC, which is responsible for 2,500 employees and contractors working on offshore rigs and platforms, has in-house meteorologists tracking the storm and has begun assessing the amount of time it would take to evacuate various facilities.

BP spokesman Hugh Depland said one of the key factors behind any decisions about when to evacuate employees is whether the winds are light enough for helicopters to land on offshore rigs and platforms.

"Helicopters that we have historically flown, they don't like to shut down if the wind is above 60 knots," Depland said.

After climbing as high as US$73.75, light sweet crude for October delivery settled at US$72.51, an increase of US$0.15 on the New York Mercantile Exchange. Natural gas futures rose as high as US$7.54 per 1,000 cubic feet (US$0.2663 per cubic meter), then eased back to US$7.157, an increase of US$0.078. Gasoline futures gained US$0.0336 to close at US$1.8951 per gallon (US$0.5006 per liter).

On London's ICE Futures exchange, Brent crude for October delivery dropped US$0.02 to settle at US$72.70 a barrel.

"The Iranian nuclear issue will keep a floor under prices for a long time, and we are entering into the peak of the US hurricane season," said Victor Shum, an analyst at Purvin & Gertz in Singapore.

Traders are concerned about the possibility of Iran, the world's fourth-biggest oil producer, blocking oil exports if it's sanctioned by the UN over its nuclear program.

The UN set an Aug. 31 deadline for Iran to halt its nuclear program, but Tehran said on Tuesday that it wanted to negotiate further.

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