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April 4, 2005
US Stocks Gain Ground, Oil Hits and Falls Back from Record High
by HNN Staff
New York, N.Y. (HNN) Wall Street pushed slightly higher today, as oil prices hit and then pulled back from record highs.
With no major economic news to influence stocks, the Dow Jones industrial average closed up 15 points at 10,419.
The Nasdaq added six points to close at 1,991 and the broad-market S&P 500 finished up three points at 1,176.
Oil soared to a record higher than $58 a barrel, adding pressure on producer cartel OPEC to hike supplies, before profit-taking by speculators eased prices into negative territory.
By 4:30 PM, West Texas intermediate crude was worth $57.01 a barrel, down 25 cents.
In London, the FT100 closed down 17 points at 4,896.
In Australia yesterday, the All Ordinaries index closed down 17 points at 4,109.
On the Sydney Futures Exchange, the Share Price 200 contract finished down two points at 4,144.
Gold was trading at $424.35 an ounce, down $1.15.
Oil Prices Soar to Record High
World oil prices have hit fresh historic high points, climbing above $58 a barrel in New York on tight supplies, as OPEC began consultations to consider raising output by 500,000 barrels per day.
New York's main contract, light sweet crude for May delivery, struck a record intra-day high of $58.18 in electronic trading amid worries over US refining capacity and the continued fallout from a study that indicated prices could hit $100, analysts said.
It later stood at $58.13, a rise of 86 cents on Friday's closing price.
The price of Brent North Sea crude oil for delivery in May hit $57 for the first time, peaking at $57.65 per barrel.
It later stood at $57.62, up $1.11.
"Many market players, particular funds, believe prices will climb a lot higher before demand for oil drops," Societe Generale analyst Frederic Lasserre said.
Despite the fact that the US enjoys rising levels of crude stockpiles, there are fears that refineries will be unable to turn it into gasoline quickly enough ahead of the country's so-called "summer driving season" that begins next month.
"Basically, the fear is that with the [US] gasoline season coming into play now, there will be insufficient supply to meet demand," said Eswaran Ramasamy, the Singapore director of energy information giant Platts.
Americans were gearing up for their summer vacations beginning in May, when they take to the open roads in their vehicles.
New regulations for oil refineries introduced by the US last year calling for stringent environmental specifications have meanwhile left companies scrambling to meet standards, Mr Ramasamy said.
"Now, we have to wait to see how many refineries ... can meet the specifications. If they are unable to, then the market is in for another bull run."
Compounding tight refinery capacity has been recent news of a shutdown at Venezuela's Paraguana refinery, the largest in the world, owing to electrical problems.
It came after US oil major ChevronTexaco was forced to shut the crude distillation unit at its 210,000-barrels per day Pembroke refinery in Wales late last month, which followed a fatal blast at BP's biggest oil refinery in the southern US state of Texas.
In a bid to calm prices, OPEC president Sheikh Ahmed Fahd al-Sabah said the cartel had begun consultations to consider raising output by 500,000 barrels per day and expected a decision within two weeks.
Oil Slips Off Record High
Oil soared to a record higher than $58 a barrel overnight, adding pressure on producer cartel OPEC to hike supplies, before profit-taking by speculators eased prices into negative territory.
US crude on the New York Mercantile Exchange peaked at $58.28 a barrel - the highest front-month oil futures price on record before ending the day down 26 cents to $57.01 a barrel.
London's Brent crude slipped 28 cents to $56.23 a barrel.
Prices have surged 5 per cent since a forecast last week by Goldman Sachs bank that oil could eventually spike above $100 as global demand growth strains supply capacity.
OPEC President Sheikh Ahmad al-Fahd al-Sabah said on Monday cartel oil ministers had begun telephone consultations on possibly increasing production by a further 500,000 barrels per day (bpd) to cool prices.
"If there is a decision it should be in the next two weeks. For that, if there will be any new production, it should be in May," Sheikh Ahmad said, also Kuwait's energy minister.
The Organisation of the Petroleum Exporting Countries (OPEC) raised output limits by 500,000 bpd to 27.5 million bpd in mid-March and left room for a second rise before a June meeting if prices failed to ease below $55.
US Treasury Secretary John Snow on Monday described high energy prices as "extraordinarily unwelcome" and said that they will take a toll on the economy's generally positive performance.
"The American economy seems to be on a good path, but I do worry about energy," Mr Snow told a tax executives' conference.
"We're not an economy geared to $60 [a barrel] oil."
In inflation-adjusted terms, oil prices remain well-below the roughly $90-a-barrel peak hit in the 1980s, calculations by the International Energy Agency say.
