Gulf Storm leads to oil supply upsets and high prices in the US

08-Jul-05

As Tropical Storm Cindy in the Gulf of Mexico disrupted supplies to the U.S., crude oil continue to rise and hover around US$60 a barrel in New York. Cindy has forced USA's biggest oil terminal to stop unloading tankers in Louisiana yesterday. A second storm, Dennis is estimated to gather speed and become a hurricane as it moves toward the Gulf of Mexico, where about 38% of the nation's oil is delivered. Gulf Coast States along the Gulf are home to 50% of the nation's refining capacity Supply concerns are estimated to mount due to the closure of the Louisiana Offshore Oil Port, the biggest U.S. oil import terminal. This in turn will affect inventory levels, heightening worries that the U.S. will not be able to maintain sufficient oil stockpiles to meet peak demand in Q4. USA's crude oil surplus' can largely be attributed to strong imports. Prices are up 51% from a year ago due to surging demand from China and the U.S., reducing the cushion between production capacity and consumption. Most oil-producing countries including members of OPEC are pumping at maximum capacity. In June, OPEC's output rose 130,000 bpa to 30.08 million bpd, the highest since October. Will oil prices cross over US$60 as the hurricanes intensify, disrupt supplies and erode stock piles?