Singapore, August 29:
US crude prices surged to over $70 a barrel in opening trade today amid concerns about supply shortages caused by Hurricane Katrina that is poised to strike the southeast coast of the US, reports Xinhua.
Oil futures on the New York Mercantile Exchange soared to $70.8 a barrel, beating the previous record of $68 set last week, after producers and refiners shut down operations ahead of the Category 5 hurricane. Katrina, measured as one of the four strongest storms on record, was expected to hit land early Monday somewhere along the Louisiana coast. The outer fringes of the storm were already being felt yesterday along the Gulf Coast. Seven southeast Louisiana refineries with a combined daily capacity of 1.45 million barrels per day (bpd) were shut alongside the Louisiana Offshore Oil Port, a major crude importing facility.
The Organisation of Petroleum Exporting Countries (OPEC), which has been pumping at its full capacity for nearly a year, expressed deep concerns over the buoyant prices. â€œWe are becoming increasingly concerned about the continuing high level of oil prices, which does not properly reflect the underlying fundamentals of the market,â€ Kuwaiti minister of energy and OPEC president Sheikh Ahmad al-Fahad al-Sabah said in a statement. He noted that current supply exceeds demand, leading to a build-up in stocks and stocks of crude and distillates are above their seven-year average.
â€œOil resources and supplies are plentiful and OPEC has been producing 1.5 million bpd more than its quotas in the third quarter of 2005,â€ Sheikh Ahmad said, â€œFurthermore, demand is starting to slow down as a result of high prices. In view of these fundamentals, one expects to witness some price moderation.â€ OPEC is meeting on September 19 to chart its future output policy.
OPEC admitted that it was concerned about the persistently high price of oil on Sunday as the US braced itself for potential damage to oil production in the Gulf of Mexico, which could be in the path of Hurricane Katrina. The last category five hurricane to hit America was Hurricane Andrew in 1992, which cost insurersâ€™ $21 billion â€” the worse storm damage in history. Fears that damage to rigs could send oil prices rising even further kept the price of crude above $67 a barrel on Friday. â€” The Guardian