Crude oil prices hit fresh record highs on Monday as speculative interest more than doubled in the wake of recent refinery outages and renewed geopolitical tensions.
Speculators on the New York Mercantile Exchange in the week to August 2 increased their net long positions to 26,070 contracts from 11,929 contracts, the Commodity Futures Trading Commission said last Friday.
“Given the tightness evident in this market, we believe that funds still have appetite to add to long positions, presenting further upside risk to futures prices,” said Kevin Norrish, energy strategist at Barclays Capital.
The main impetus on Monday came from renewed security concerns in the Middle East, as US embassy and consulate buildings were shut in Saudi Arabian cities.
The US State Department said the closures were due to a “specific and credible” threat.
Meanwhile, in Iran, the new president was sworn in during a weekend that saw Tehran reject plans devised by the European Union to help the country scrap its nuclear energy policy.
On Monday, UN inspectors arrived at a uranium conversion plant to supervise the removal of seals in a move that suggested the country would soon restart its nuclear programme.
In New York on Monday, Nymex West Texas Intermediate for September delivery rose $1.63 to settle at $63.94 a barrel, after earlier hitting a new record high of $63.95. Brent crude for September was also up $1.63 to settle at a new record high of $62.70 a barrel.
Underpinning the move in prices was the possibility of fuel supply shortages over the remainder of the summer. US petrol inventory losses last week were largely the result of unplanned refinery shutdowns in the past fortnight. These included Exxon Mobil’s 245,000 barrel-per-day plant in Joliet, Illinois, and BP’s Texas City refinery, where two catalytic crackers were shut down last Tuesday.
BP said on Monday that it was reopening the largest of the two, capable of output of 62,000b/d. “The system is still very tight, which is why the supply concerns are pushing up prices,” said Catherine Arnfield at Credit Suisse First Boston.
Lingering concerns during the Atlantic hurricane season have added to the pressure on prices.
Although there have been no associated disruptions to supplies since Hurricane Dennis knocked out the Thunder Horse platform in the Gulf of Mexico in June, this is still expected by US weather forecasters to be one of the busiest hurricane seasons on record.
BP announced last week that it did not expect Thunder Horse to restart production until 2006.
