Oil prices rise subsequent to a production shutdown at Alaska

07-Aug-06

Oil prices rose in Asia on Monday, following a production shutdown at a large oil field in Alaska and the persistent violence in the Middle East. Light, sweet crude for September delivery spiked to US$74.95 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange. The continuing violence between Israel and Hezbollah guerrillas in Lebanon is almost in its fourth week, even as diplomatic efforts seem to be intensifying as the U.N. Security Council is to meet later on Monday on a revised resolution. Additionally, BP Exploration Alaska, Inc. began shutting down oil production at the large Prudhoe Bay field on Sunday due to severe corrosion and a small spill from a transit line, for an unspecified period of time. Once the field is shut down, oil production is to be reduced by 400,000 bpd - almost 8% of U.S. oil production as of May 2006. This will not have any immediate impact on U.S. supplies as currently crude inventories are very high and the markets in USA are well-supplied. Three Filipinos working for the U.S. construction firm Baker Hughes Inc. were kidnapped in southern Nigeria on Friday. This incident happened a day after a German was abducted in a region where the handling of oil revenue has caused strife between multinational companies and local communities. Despite high oil prices, energy demand in the United States and other countries, especially China, continues to be strong. The Energy Department, in its weekly petroleum report on Wednesday, reported that U.S. gasoline demand is still above year-ago levels.