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Oil rises more than $1, tropical storm threatens supply
Brent climbs above $115/barrel, U.S. crude rises above $97; Oil supported by hopes of more stimulus measures by the Fed; Norwegian oil services workers break off wage talks
August 27, 2012 12:50 by Reuters
Oil futures rose more than a dollar on Monday, with Brent climbing above $115 per barrel, on supply worries as Tropical Storm Isaac threatened to interrupt most U.S. offshore oil production in the Gulf of Mexico.
Oil prices got a further shot in the arm from hopes of more U.S. stimulus measures, which would boost the outlook for demand from the world’s top consumer of oil.
Brent crude futures rose $1.31 to $114.90 a barrel by 0437 GMT, after rising to a high of $115.50 earlier in the session. U.S. crude was up $1.06 to $97.21.
“The storm will have a temporary impact on prices. But everyone is waiting for the European Central Bank and U.S. Federal Reserve meetings ahead,” said Tony Nunan, a risk manager at Mitsubishi Corp in Tokyo.
“Technically, Brent has been strong, so it looks like it’s continuing that trend after the temporary blip on Friday and simply reversing the falls.”
Oil prices fell on Friday after a report that the International Energy Agency is likely to tap strategic oil reserves as soon as September, dropping its resistance to a U.S.-led plan.
But prices are now turning upwards ahead of the annual U.S. Jackson Hole meeting of central bankers and economists later this week, where Fed Chairman Ben Bernanke will deliver a speech that will be scoured for clues on a third round of quantitative easing.
The markets will also look for policy signals from the euro zone ahead of a Sept. 6 meeting of the European Central Bank.
“The markets are now getting excited on the possibility of additional monetary stimulus by the Federal Reserve,” said Ben Le Brun, a Sydney-based market analyst at OptionsXpress.
“I don’t think traders will want to be caught short ahead of the Jackson Hole meeting especially when there’s an upside risk.”
SUPPLY DISRUPTION FEARS
Oil prices drew support from the threat to U.S. offshore oil production in the Gulf of Mexico from the Tropical Storm Isaac — which is expected to strengthen to a Category 2 hurricane and hit the Gulf Coast somewhere between Florida and Louisiana at midweek..
Meteorologists at Weather Insight, an arm of Thomson Reuters, predict the storm will spur short-term shutdowns of 85 percent of the U.S. offshore oil production capacity and 68 percent of the natural gas output.
The Gulf of Mexico accounts for about 23 percent of U.S. oil production and 7 percent of natural gas output, according to the U.S. Energy Information Administration.
About 30 percent of U.S. natural gas processing plant capacity and 44 percent of the country’s refining capacity also line the Gulf Coast, the EIA said.
There are other supply worries as well.
Delays in Iraq’s pipeline construction threaten to stall production at Royal Dutch Shell’s Majnoon oilfield for at least three months, forcing the field to miss a 2012 target of 175,000 barrels per day.
In Norway, oil services workers broke off wage talks with oil companies on Friday, taking the sector a step closer to its second strike within two months.
Norway’s vital oil sector was hamstrung last month when production workers held a 16-day strike over pay and the right to early retirement, driving up oil prices.
An upcoming maintenance-related drop in North Sea output and ongoing Middle East turmoil also underpinned Brent prices.
Britain’s largest oilfield, Buzzard, which is the single biggest contributor to the Forties crude oil stream and usually sets the price of the Brent benchmark, will shut next month, suspending output until mid-October.
Adding to Middle East uncertainties, Iran’s foreign minister urged delegates at a Non-Aligned Movement developing nations summit on Sunday to oppose sanctions imposed by the West on the Islamic Republic to punish it for its nuclear activities.
(Editing by Himani Sarkar)