Crude oil rose as concern eased that travelers will avoid flying after the threat of a terrorist attack and as diplomats disagreed about a United Nations resolution to end the Lebanon conflict.
Air travel on both sides of the Atlantic Ocean was disrupted yesterday after U.K. authorities arrested 24 men they said were planning to blow up planes from London to the U.S. British Airways Plc, Europe's third-largest airline, said it plans to operate a ``near-normal'' schedule today. Heathrow, Europe's busiest airport, returned to almost regular operations today, said Tony Douglas, a managing director at the airport.
Crude oil for September delivery gained as much as 81 cents to $74.81 a barrel on the New York Mercantile Exchange. It traded at $74.53 a barrel at 2:12 p.m. London time. The contract fell 3.1 percent to $74 yesterday, the biggest drop since May 15, following the announcement of the arrests.
``The move down yesterday was so big,'' said Nils-Erik Berg, a Stockholm-based oil trader with Preem Petroleum AB, Sweden's largest oil company. The Middle East fighting is ``a big problem, and any escalation is pushing the price very high because of potential supply disruptions, such as from Iran.''
Brent crude oil for September settlement rose 61 cents to $75.89 a barrel on the ICE Futures exchange.
Concern that the conflict between Israel and Iran-supported Hezbollah forces in Lebanon might spread in the Middle East, source of almost a third of world supply, pushed oil to a record $78.40 a barrel on July 14. Iran is the world's fourth-largest oil producer.
Cease-Fire Proposal
Russia will ask the United Nations Security Council to demand a 72-hour cease-fire in Lebanon, hampering efforts to produce an agreement on a U.S.-French resolution aimed at ending fighting.
Vitaly Churkin, Russia's UN ambassador, said late yesterday there is no ``immediate prospect'' the U.S.-French resolution will be accepted. U.S. envoy John Bolton said discussions will continue today in New York.
``There must be at least a $15 to $20 premium for geopolitical risk in prices today,'' said Jason Kenney, an analyst at ING Financial Markets in Edinburgh. ``The Middle East turmoil does unnerve the market, the commodities market in particular.''
Retail sales in the U.S. rose more than forecast last month, showing that consumers are taking higher gasoline prices in stride. The 1.4 percent increase was the biggest since January, the Commerce Department said today. It was higher than the 0.9 percent rise expected by analysts surveyed by Bloomberg News.
Gasoline Demand
``The surprising thing has been gasoline demand in the United States has been very strong despite these high prices,'' said Jacques Rousseau, an analyst at Friedman Billings Ramsey & Co., in Arlington, Virginia. ``Don't expect too much of a pullback'' in gasoline prices.
Gasoline for September delivery fell rose 5.56 cents to $2.0445 a gallon in New York. The daily average price of unleaded gasoline in the U.S. rose to $3.032 per gallon yesterday, up 2.3 percent from last month, according to the American Automobile Association, the largest motoring club in the U.S.
BP has gained permission from federal Department of Transportation pipeline regulators to keep about a quarter of the oil flowing from Alaska's Prudhoe Bay, the largest U.S. oil field.
Prudhoe Bay
The International Energy Agency today lowered its estimate of U.S. oil supply by 300,000 barrels a day in the third and fourth quarters because of Prudhoe Bay. Asian, Saudi Arabian and Latin American producers may be able to help plug a supply gap left by the partial shutdown, the agency said.
``The actual net loss isn't quite as much as it appears,'' said Lawrence Eagles, head of the IEA's oil markets division. The Prudhoe Bay crude is ``not the high-quality crude which is produced by Nigeria, for example'' and can be ``reasonably easily offset by'' increased supplies from the Organization of Petroleum Exporting Countries.
BP guaranteed supplies to refineries in Alaska and bought 3.5 million barrels of crude to supply refineries in California and Washington.
``It may not be the most ideal quality of crude,'' ING's Kenney said. ``There will be Mexican, Venezuelan crude going off toward the West Coast. Saudi Arabian crude can fill in; there is capacity on the market at this time.''
Conoco Force Majeure
London-based BP earlier this week said corroded pipelines would force it to shut all of Prudhoe Bay, which can produce 400,000 barrels a day, or 8 percent of U.S. output. Alaska holds the second-biggest oil reserves in the U.S. after Texas, according to the Energy Information Agency.
ConocoPhillips, the third-largest U.S. oil company, declared force majeure on its oil deliveries from Prudhoe Bay fields, meaning it may not fulfill contracts.
Crude oil may rise next week because of declining U.S. inventories and concern that the conflict between Israel and Hezbollah will intensify, threatening supplies. Half the 44 analysts and traders surveyed by Bloomberg News said prices will gain next week.
The IEA increased its forecast for Chinese oil demand growth this year on higher use of gasoline as more Chinese people drive.
China, the world's second-largest oil user, may consume 6.5 percent more oil this year, with demand reaching 7.1 million barrels a day, said the IEA, an adviser to 26 oil-consuming nations. It previously forecast 2006 demand growth of 6.1 percent.
``There is plenty of oil to be found in the ground, it's just a matter of investment in new capacity'' to meet the growing demand, ING's Kenney said. ``I'm not a believer in peak oil. The Stone Age never ended for a lack of stone and the oil age won't end for the lack of oil.''
Air travel on both sides of the Atlantic Ocean was disrupted yesterday after U.K. authorities arrested 24 men they said were planning to blow up planes from London to the U.S. British Airways Plc, Europe's third-largest airline, said it plans to operate a ``near-normal'' schedule today. Heathrow, Europe's busiest airport, returned to almost regular operations today, said Tony Douglas, a managing director at the airport.
Crude oil for September delivery gained as much as 81 cents to $74.81 a barrel on the New York Mercantile Exchange. It traded at $74.53 a barrel at 2:12 p.m. London time. The contract fell 3.1 percent to $74 yesterday, the biggest drop since May 15, following the announcement of the arrests.
``The move down yesterday was so big,'' said Nils-Erik Berg, a Stockholm-based oil trader with Preem Petroleum AB, Sweden's largest oil company. The Middle East fighting is ``a big problem, and any escalation is pushing the price very high because of potential supply disruptions, such as from Iran.''
Brent crude oil for September settlement rose 61 cents to $75.89 a barrel on the ICE Futures exchange.
Concern that the conflict between Israel and Iran-supported Hezbollah forces in Lebanon might spread in the Middle East, source of almost a third of world supply, pushed oil to a record $78.40 a barrel on July 14. Iran is the world's fourth-largest oil producer.
Cease-Fire Proposal
Russia will ask the United Nations Security Council to demand a 72-hour cease-fire in Lebanon, hampering efforts to produce an agreement on a U.S.-French resolution aimed at ending fighting.
Vitaly Churkin, Russia's UN ambassador, said late yesterday there is no ``immediate prospect'' the U.S.-French resolution will be accepted. U.S. envoy John Bolton said discussions will continue today in New York.
``There must be at least a $15 to $20 premium for geopolitical risk in prices today,'' said Jason Kenney, an analyst at ING Financial Markets in Edinburgh. ``The Middle East turmoil does unnerve the market, the commodities market in particular.''
Retail sales in the U.S. rose more than forecast last month, showing that consumers are taking higher gasoline prices in stride. The 1.4 percent increase was the biggest since January, the Commerce Department said today. It was higher than the 0.9 percent rise expected by analysts surveyed by Bloomberg News.
Gasoline Demand
``The surprising thing has been gasoline demand in the United States has been very strong despite these high prices,'' said Jacques Rousseau, an analyst at Friedman Billings Ramsey & Co., in Arlington, Virginia. ``Don't expect too much of a pullback'' in gasoline prices.
Gasoline for September delivery fell rose 5.56 cents to $2.0445 a gallon in New York. The daily average price of unleaded gasoline in the U.S. rose to $3.032 per gallon yesterday, up 2.3 percent from last month, according to the American Automobile Association, the largest motoring club in the U.S.
BP has gained permission from federal Department of Transportation pipeline regulators to keep about a quarter of the oil flowing from Alaska's Prudhoe Bay, the largest U.S. oil field.
Prudhoe Bay
The International Energy Agency today lowered its estimate of U.S. oil supply by 300,000 barrels a day in the third and fourth quarters because of Prudhoe Bay. Asian, Saudi Arabian and Latin American producers may be able to help plug a supply gap left by the partial shutdown, the agency said.
``The actual net loss isn't quite as much as it appears,'' said Lawrence Eagles, head of the IEA's oil markets division. The Prudhoe Bay crude is ``not the high-quality crude which is produced by Nigeria, for example'' and can be ``reasonably easily offset by'' increased supplies from the Organization of Petroleum Exporting Countries.
BP guaranteed supplies to refineries in Alaska and bought 3.5 million barrels of crude to supply refineries in California and Washington.
``It may not be the most ideal quality of crude,'' ING's Kenney said. ``There will be Mexican, Venezuelan crude going off toward the West Coast. Saudi Arabian crude can fill in; there is capacity on the market at this time.''
Conoco Force Majeure
London-based BP earlier this week said corroded pipelines would force it to shut all of Prudhoe Bay, which can produce 400,000 barrels a day, or 8 percent of U.S. output. Alaska holds the second-biggest oil reserves in the U.S. after Texas, according to the Energy Information Agency.
ConocoPhillips, the third-largest U.S. oil company, declared force majeure on its oil deliveries from Prudhoe Bay fields, meaning it may not fulfill contracts.
Crude oil may rise next week because of declining U.S. inventories and concern that the conflict between Israel and Hezbollah will intensify, threatening supplies. Half the 44 analysts and traders surveyed by Bloomberg News said prices will gain next week.
The IEA increased its forecast for Chinese oil demand growth this year on higher use of gasoline as more Chinese people drive.
China, the world's second-largest oil user, may consume 6.5 percent more oil this year, with demand reaching 7.1 million barrels a day, said the IEA, an adviser to 26 oil-consuming nations. It previously forecast 2006 demand growth of 6.1 percent.
``There is plenty of oil to be found in the ground, it's just a matter of investment in new capacity'' to meet the growing demand, ING's Kenney said. ``I'm not a believer in peak oil. The Stone Age never ended for a lack of stone and the oil age won't end for the lack of oil.''
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