KUALA LUMPUR, Malaysia, (AP) -Oil prices inched past the $64 a barrel mark Tuesday in Asia, as traders reacted to news that output at a mammoth BP PLC platform in the Gulf of Mexico would not be restored until mid-2008, at the earliest.
Oil traders were also cautious after Iran’s latest threat to halt nuclear inspections if the U.N. went ahead with sanctions over its enrichment program.
Tuesday midmorning in Singapore, benchmark oil prices on the New York Mercantile Exchange for front-month October contracts were up by as much as 32 cents to $64.12 a barrel, before easing to $64.02 a barrel in the afternoon. It settled at $63.80 overnight in New York.
October contracts expire Wednesday.
Despite the gains, energy futures have been in a tailspin in recent weeks due to a combination of soaring global inventories, a weakening U.S. economy and a perception of reduced geopolitical and hurricane threats.
BP’s Thunder Horse platform in the Gulf of Mexico, which has the capacity to produce as much as 250,000 barrels per day of oil and 200 million cubic feet a day of natural gas, had been expected to be running by early 2007. But Europe’s second-largest oil company announced Monday that new undersea equipment failed during a test and would need to be rebuilt.
The platform was damaged during last year’s hurricane season.
“It’s hard to point to anything in particular but I think the Thunder Horse news and agitation by Iran contributed to short-covering,” said MAN Financial analyst Andrew Lebow.
In Vienna, concerns about Iran’s nuclear intentions dominated statements at the opening session Monday of the 140-nation International Atomic Energy Agency conference.
“We believe it is their intention to make a nuclear weapon,” U.S. Secretary of Energy Samuel Bodman said.
Iranian Vice President Reza Aghazadeh said that his country would respond to sanctions, or “hostile action,” by suspending international inspections of its nuclear program.
Iran, the Organization of Petroleum Exporting Countries’ second-largest exporter, contends it is within its right to enrich uranium for energy.
Analysts fear Tehran will respond to any U.N. sanctions by shutting off pipelines and disrupting oil tanker shipments in the region, possibly breaking into the supply chain.
Oil prices are down nearly 20 percent from a record high of $78.40 a barrel mid-July, but at least one analyst said he thought prices were still too high.
“Commodity markets are currently experiencing an optical illusion,” said Morgan Stanley Asia analyst Andy Xie in a research note. “The current (Brent) price is still higher than the average of $54.6 a barrel in 2005 and three times the average price in the 1990s.”
Brent crude rose 29 cents to $64.34 on London’s ICE a barrel Tuesday. The commodity has risen in tandem with prices on the Nymex.
Also Tuesday, eastward-moving Hurricane Gordon was upgraded to a Category 2 storm and headed for the Azores. It is not immediately clear if it will move into the Gulf of Mexico’s oil-producing region.
In other Nymex prices, heating oil and gasoline rose to $1.734 and $1.587 a gallon respectively, while natural gas pushed back in the $5 range to $5.03 per 1,000 cubic feet, a rise of 8 cents.