Crude oil was little changed after rising yesterday as Tropical Storm Gustav formed in the Caribbean Sea, raising concern it may disrupt production at oil fields in the Gulf of Mexico.
Crude oil for October delivery was at $114.92 a barrel, down 19 cents, at 1.54pm Singapore time on the New York Mercantile Exchange. Prices are up 60 per cent from a year ago. Yesterday, futures rose 0.5 per cent to settle at $115.11.
Brent crude oil for October settlement was at $113.92 a barrel, down 11 cents, on London's ICE Futures Europe exchange at 1.54pm Singapore time. It rose 11 cents to $114.03 a barrel yesterday.
Gustav has strengthened to near-hurricane force with winds of about 110km an hour and was moving toward the Gulf, a National Hurricane Centre advisory showed. Fields in the Gulf of Mexico account for about 20 per cent of U.S. oil output.
Prices also rose after Russian lawmakers voted to recognise the independence of two breakaway Georgian regions, increasing the prospect of tensions in the area. Both houses of Russia's Parliament voted to recognise the independence of South Ossetia and Abkhazia, the two regions that sparked Russia's first foreign incursion since the Soviet era.
"Prices were pushed higher by the storm but before we confirm the impact it's difficult to know for sure," said Tetsu Emori, a fund manager with Astmax in Tokyo. "The geopolitical tensions between the US and Russia and even the EU are going to be a problem."
Meanwhile, the Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, resumed oil flows. The loadings followed repairs and testing after the pipe was closed on August 5th when an explosion sparked a blaze on the 1,768km pipeline.
The BTC carries as much as 1 million barrels of Azeri crude each day through Georgia to Turkey's Mediterranean coast.
Azerbaijan sent oil to export via Iran because of the disruption, with Iranian Oil Terminals receiving the first cargo for transit August 24, according to the Iranian Oil Ministry's news agency, Shana. Iran can handle 200,000 barrels a day of Caspian and Central Asian crude and could boost the volume to 500,000 barrels daily under swap agreements, Shana said on its website. It didn't specify how much Azeri crude Iran received.
Iran may urge Opec to cut oil production to support crude prices after a decline of more than $30 a barrel since last month, the country's Oil Ministry said.
"The issue of surplus oil in the market and the control of prices are among the serious themes of the coming Opec meeting," oil minister Gholamhossein Nozari said in a Shana report. "It appears that Opec members plan to prevent the decreasing trend of oil prices."
Members of the Organisation of Petroleum Exporting Countries, which contributes more than 40 per cent of the world's oil, are scheduled to meet on September 9th in Vienna to review output targets.
US crude-oil inventories probably rose last week because refinery operations are lower than in previous years, a Bloomberg News survey of analysts showed. Refineries probably operated at 86.2 per cent of capacity in the week ended August 22, up 0.5 percentage point from the week before. The hypothetical profit margin, or crack spread, for refining crude oil for October delivery into gasoline was $2.838 a barrel today, down 47 per cent from a week ago.
Inventories of crude oil probably rose 1.1 million barrels last week from 305.9 million, according to the median of responses by five analysts before an Energy Department report this week.
Gasoline stockpiles probably fell 3.4 million barrels from 196.6 million barrels the week before, the survey showed.
Inventories of distillate fuel, including heating oil and diesel, probably declined 800,000 barrels from 132.1 million barrels.
Bloomberg