Weather forecasts in the United States said Tropical Storm Cindy was headed for the Louisiana to Florida coast, potentially threatening oil infrastructure in the Gulf of Mexico. News of the storm had a bigger impact on product futures than on crude, driving US heating oil futures to a record of US$1.758 a gallon.
Tropical storms threatening to hit the Gulf of Mexico, home to 25% of US oil and gas production, compounded worries that inventories will fail to build in time (fourth quarter) for peak winter demand. Interestingly, US crude oil inventories are close to their highest level for six years US oil prices shot up to US$59.35 a barrel after touching US$60.10. Brent crude in London rose to US$58.65 a barrel.
Despite the approaching storm, oil companies expect very little impact on production especially compared to last September's Hurricane Ivan. Oil majors Chevron, Shell and BP have taken preliminary steps and evacuated some workers. However, what was worrisome was the fact that this is the earliest date on record for four named tropical storms, accentuating forecasts for a heavy 2005 hurricane season.
An increase in OPEC output has thus far had limited impact in a market supported by refinery bottlenecks rather than a shortage of crude. Last week OPEC suspended talks of increasing production by a further 500,000 bpd, as the focus on oil products has blunted efforts to soothe supply worries by pumping at the highest level in 25 years - at over 30 million bpd. Last week OPEC had decided to bring on the extra production if prices rose to US$60 a barrel.
06-Jul-05 
