Oil prices face new pressure

Hurricane Ivan and more trouble for Yukos have increased pressure on oil prices.

13:09 20 September 2004

Crude oil futures are continuing to climb, as concern grows about refinery and production shutdowns caused by Hurricane Ivan.

The disruptions caused by the latest storm to hit the United States reduced US oil output by at least 5.1 million barrels last week, according to figures compiled by the Bloomberg news agency.

Ivan struck Alabama last week and, while it missed drilling platforms and refineries in Louisiana, many were closed for safety reasons, including the Louisiana Offshore Oil Port, the biggest US crude-oil import terminal.

Crude oil for October delivery rose as much as 30 cents, or 0.6 per cent, to $45.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange, while gasoline for October delivery rose 0.47 cents, or 0.4 per cent, to $1.275 a gallon in after-hours trading.

Hurricane Ivan shut down at least a sixth of refining capacity along the Gulf of Mexico and reduced offshore oil production by 83 per cent, closing ports and delaying tankers carrying crude oil and gasoline.

Disruptions from Hurricane Ivan may result in another decline in US crude oil inventories, which have dropped 8.7 per cent since June. Crude oil prices have fallen 7.2 per cent from the record of $49.40 a barrel reached on August 20th, but remain 70 per cent higher than a year ago.

Earlier today, it emerged that the troubled Russian oil company, Yukos, had suspended the majority of oil exports to China. The move is expected to add to the pressure on oil prices.

Mikhail Khodorkovsky, the former head of Yukos, is accused of seven charges of fraud, embezzlement and tax evasion and following his arrest last October, tax authorities served Yukos with a $3.4 billion tax bill. The firm claims this latest decision to cut supplies is part of its attempt to avoid bankruptcy.