NEW YORK, Aug 29: Oil prices topped $70 a barrel on Monday for the first time as a powerful hurricane wreaked havoc in the crude-producing Gulf of Mexico, home to 25 per cent of US oil and gas production.
Some analysts are now predicting that prices could aim for the once unthinkable $80 a barrel — a level economists fear could severely dent consumer demand and curb business activities.
New York’s main contract, light sweet crude for delivery in October, rose $2.57 a barrel to $68.70 in early trade.
In overnight electronic trade the price had breached the psychological barrier of $70 a barrel, blazing a new record high of $70.80.
The London market was closed Monday for a holiday.
Crude had closed at $66.13 in the US market on Friday as the market nervously awaited the impact of the monstrous hurricane on the world’s biggest economy.
It had hit a record closing price on Thursday of $67.49, and briefly touched a record of $68 late Wednesday — the highest point since it was first traded in 1983.
In London on Friday, the price of Brent North Sea crude oil for delivery in October gained 29 cents to $66.56 per barrel, not far off its record of $66.85 on August 14.
The US government said on Monday it was ready to tap into its strategic oil reserves to keep supplies flowing as the storm slammed into the Louisiana coast, hitting onshore refineries around the evacuated city of New Orleans.
Gulf of Mexico and onshore oil and natural gas facilities had closed ahead of the storm, a threat to facilities at Port Fourchon, Lousiana, near New Orleans, which handles around one-sixth of US oil supply, and rigs in the Gulf of Mexico.
Agbeli Ameko, managing partner at First Enercast, said crude prices could push toward $75 a barrel on Monday and said $80 a barrel in the short term was realistic.
“Katrina is approaching... at a time in which the supply and demand is in a delicate balance,” he said.
Oil prices have been driving up to new record highs as refineries struggle to cope with booming energy demand around the world. Any problems with production anywhere have been sending prices up still further.
The hurricane was expected to have a significant short- and long-term impact on energy markets, impacting production offshore and onshore, and shutting in refining and processing facilities.
In Vienna on Monday, Opec spokesman Abdulrahman Al-Kheraigi said Opec ministers might consider raising the cartel’s production quotas when they meet on September 19.
