Oil prices were on the ascendency again this week, with a cocktail of supply issues pushing Nymex West Texas Intermediate to a new record of $68 a barrel.
The benchmark crude price hit its new high on Thursday, extending the gains made after US inventory data on Wednesday showed an unexpectedly large drawdown in petrol stockpiles. This showed demand for petrol, in spite of concerns over the impact of high prices, expanded robustly during the previous week.
But the major concerns throughout the week centred on the real and implied threats to global supply of crude.
There were sabotage attacks on oil infrastructure in Iraq’s northern oilfields near Kirkuk on Friday. The attack on a well, which pumps 7,000 to 10,000 barrels per day of crude, proved a timely reminder of how vulnerable the area is to such attacks.
Meanwhile, protesters in Ecuador, whose attacks on the country’s oil industry last week were responsible for production losses, signed a deal on Thursday.
Much of the production was back on line, but still running at around 50,000 barrels per day below average, and the country’s oil minister said some wells may have been permanently damaged and unable to return to full production.
Kevin Norrish at Barclays Capital highlighted the importance of every barrel of oil in the current environment. “The major lesson of the Ecuadorian situation is that even a relatively small stoppage, and one that would normally be well below the radar of market consciousness, can be a price driver in a system exhibiting no slack,” he said.
Always looming in the background was the strengthening tropical depression in the Atlantic that, by Friday, had been upgraded to become Hurricane Katrina – the 11th named storm of the year in that region.
There were still some doubts as to Katrina’s likely course as it entered the Gulf, but, with winds of up to 75mph, producers in the region treated all forecasts cautiously and evacuated non-essential workers from their platforms.
Around 30 per cent of US oil is produced in the Gulf of Mexico and, as Hurricane Ivan proved last year, weather systems in the region can wreak havoc on output.
By the end of the session in New York on Friday, however, prices had slipped a little on profit-taking. Nymex West Texas Intermediate for October delivery was down $1.36 at $66.13 a barrel, but up 1 per cent on the week.
October Brent on London’s International Petroleum Exchange was down $1.40 at $64.87 a barrel, after hitting a record high of $66.65 on Thursday. Brent was also up 1 per cent on the week.
Alan Greenspan, chairman of the US Federal Reserve, attempted to settle some nerves yesterday, saying that the economy in the US was proving resilient to the higher oil prices.
“The flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years,” he said.
Copper prices rose as speculators considered that the sell off earlier in the week on news of inventory gains had been overdone.
Stockpiles of the metal in warehouses monitored by the London Metal Exchange rose to nearly 65,000 tonnes, up 3,800 tonnes on the week.
But this was only a third of the rise seen in the previous week, and the total still represented less than two day’s worth of global demand.
Three-month copper ended the week at $3,610 a tonne, a weekly gain of 1.3 per cent, but still 1.6 per cent below the $3,670 record high set on August 16.
John Kemp at Sempra Metals remained cautious about the current strength in copper prices. “The bulls feed on the belief these markets are very thin and illiquid, but the longer prices remain at these levels, the larger stockpiles will become,” he said.
