Crude futures ease after soaring to record highs in Monday rally

Here's an article from the Canadian Press where they talk about how high the price of oil got when the king of Saudi Arabia died yesterday. The article predicts that prices will be $3 higher in the winter. It also says that oil prices can change based on any little worrying news item.

"Crude futures ease after soaring to record highs in Monday rally

Edith Balazs
Canadian Press

Tuesday, August 02, 2005

BUDAPEST, Hungary (AP) - Crude oil prices slipped Tuesday in lackluster trading after rallying to record highs Monday on news of the Saudi king's death and Iran's latest threat to resume its nuclear processing activities.

The death of Saudi Arabia's King Fahd on Monday sent prices to a record close of US$61.57 a barrel after they reached a new intraday high of US$62.30.

Recent refinery fires in the United States also unsettled the market, fueling fears that supply will run short at a time of surging demand for oil products.

"While I was slightly surprised by yesterday's big move, I still see a significant potential for the upside in the market and I expect prices to be some US$3 higher in the winter season than now," said energy analyst Orrin Middleton at Barclays Capital in Paris.

Light, sweet crude for September delivery fell 32 cents to US$61.25 a barrel on the New York Mercantile Exchange in midday trading.

On London's International Petroleum Exchange, Brent for September delivery was down 44 cents at $60.00 a barrel.

Petroleum products were mixed on Nymex, with September gasoline up 1.09 cents at $1.7580 a gallon and September heating oil down 49 points at $1.7120 a gallon.

Traders kept an eye on refinery operations in the United States, where the rate of output has fallen to about 93.5 per cent of capacity, down from 98.1 per cent of capacity over the past three weeks, in part because of hurricane-related power outages. Last week, two refinery fires - one in Texas, one in Louisiana - stifled production, albeit to a limited extent.

Such shutdowns play into fears that refiners may not be able to catch up with demand, especially during the fourth quarter of the year.

Tensions between the U.S. - the world's largest energy consumer - and Iran, the No. 2 producer within the OPEC cartel, also worry oil markets because Tehran can cripple markets by shutting off its taps. Iran produces about 4 million barrels daily.

Iran threatened to reopen its nuclear processing plant but has given the U.N. atomic watchdog agency two days to oversee the dismantling of U.N. seals on the equipment.

Saudi Arabia, meanwhile, said its oil policy will not change now that power has formally shifted to Fahd's brother, the de facto leader during the past decade.

However, with oil consumption rising around the world and only a limited amount of excess production capacity available, energy traders are easily put on edge by a change in the weather in an oil-pumping region, let alone a transfer of authority within the world's biggest oil producer.

Weekly inventory data from the U.S. was seen as providing some bullish sentiment later on. Closely watched gasoline stocks are expected to show draws for a straight fifth week along with a drop in commercial crude inventories, according to analysts surveyed by Dow Jones Newswires."

more of this article at http://www.canada.com/businesscentre/story.html?id=f9ced318-058c-4a73-a19d-db440ff955d9