Crude oil slides down, yet holds aboveUS$53

14-Jun-05

The impending hurricane Arlene - the first big storm of the season in the Gulf of Mexico had caused only minimal damage to oil refinery operations. The threat that the storm would damage oil rigs forced oil and gas companies in the Gulf of Mexico to evacuate workers from offshore rigs, pausing production last week, and causing prices to spike up to US$55 a barrel. The halted production totalled about 25,500 bpd - 1.74% of total output. This figure could have implications on crude oil stockpiles in the US as the Gulf of Mexico accounts for almost 25% of total oil and gas output in the United States, specially since last week's inventory data showed an unexpected drop in crude stocks. Currently the market seems to be correcting downwards over relief that the impact of Arlene has been minimal, since no refinery operations have really been affected. Crude oil futures fell but held above US$53 - Light sweet crude for July fell to US$53.41 a barrel on the New York Mercantile Exchange, and in London, July Brent rose to US$52.88 a barrel. The Organization of Petroleum Exporting Countries (OPEC), which accounts for 40% global production, meets on Wednesday in Vienna. There has been a mention of the possibility of a 500,000 bpd increase in the group's official production quota. OPEC will play its role to stabilize prices on the supply side but does current demand justify adding actual oil to the market.