Oil: Prices hold near record on storm jitters

NEW YORK - Oil prices held near their record US$68 a barrel on Thursday as a tropical storm led US oil companies to evacuate workers from oil platforms in the Gulf of Mexico.

Dwindling petrol stockpiles and a spate of recent refinery problems in the world's biggest energy consumer were also underpinning strength, with some financial bookmakers saying they would start taking wagers on US$100 a barrel oil if the price broke through US$70.

US crude settled 17 cents higher at US$67.49 a barrel, after hitting US$68, the highest since US crude futures started in 1983. London Brent crude was up 26 cents at US$66.27, off its US$66.56 high.

"(The market) remains extremely sensitive to any sort of supply disruption while demand remains inelastic despite the rise in prices throughout the summer," analysts at Refco said.

The US National Hurricane Center updated its forecast on Thursday, saying it expected Katrina to miss the rigs in the Gulf of Mexico as it followed a path across southern Florida.

Nonetheless, oil companies BP and Shell announced late Thursday they were flying nonessential workers off the rigs ahead of the storm, with other companies saying they would watch developments in the weather very closely.

An unusually active Atlantic hurricane season has produced 11 named storms and could culminate in as many as 21 tropical storms and 11 hurricanes, forecasters said. Storms in the Gulf of Mexico have shut more than 6 million barrels of crude oil production so far this year.

"The oil market remains prone to short-term dislocations, with the hurricane season continuing to play a greatly magnified role in a market with limited slack," said Kevin Norrish, an analyst at Barclays Capital.

PETROL BURN

Dealers were on edge about low fuel stocks after disruptions and tensions in oil-producing countries cut crude output and propelled prices to a series of record peaks.

Petrol stocks in the United States unexpectedly tumbled 3.2 million barrels in the week to Aug. 19, widening the supply gap from a year ago, the government said.

Stocks of the auto fuel have contracted for eight straight weeks, led by higher demand as the peak driving season has almost two weeks to run its course.

Refinery snags have also skewed risks to the upside as the oil industry struggles to keep pace with demand growth, which has so far proven remarkably resilient.

"There is very strong demand and we don't see that demand receding," the International Monetary Fund's chief, Rodrigo Rato, said on Thursday. "Prices are not going back to the levels seen at the beginning of 2004." Norrish noted there was a time lag in crude prices feeding through to petrol pump prices.

"This is likely to provide a significant stress-testing in coming data releases of the, thus far, relatively benign interaction between the US economy and higher energy prices," he added.

Output in Ecuador, which mostly supplies crude to California, is still down to around 80 per cent of its 530,000-bpd level after attacks on oil infrastructure last week.

The market also watched for disruption in Nigeria, where some fuel stations shut down ahead of an expected 60 per cent hike in fuel prices. Previous government attempts to raise prices have led to general strikes in the world's eighth largest oil exporter.

- REUTERS