Oil hits $51 as hurricanes halt supplies

Crude oil prices jumped above $51 a barrel yesterday, setting a fresh record amid a prolonged production shut-down in the Gulf of Mexico in the wake of Hurricane Ivan.

Crude oil prices jumped above $51 a barrel yesterday, setting a fresh record amid a prolonged production shut-down in the Gulf of Mexico in the wake of Hurricane Ivan.

Crude for November delivery closed up $1.18 at $51.09 a barrel in New York trading, after hitting a record at $51.29. Analysts said that, in addition to the Gulf of Mexico concerns, there were technical issues at play. In London, November Brent crude gained 91 cents to $47.10 a barrel after hitting a record at $47.41.

Juan Carlos Boué, of the Oxford Institute for Energy Studies, said: "Nothing's changed. There is insufficient spare capacity. When that happens, every tiny little thing that goes wrong gives the market jitters."

He said some 12 million barrels of production had been lost as a result of Hurricane Ivan. Policy makers - including world leaders gathered at the IMF annual meeting last weekend - continue to blame the soaring price on speculators. He said this was "hogwash". He said the position of speculators on the US futures markets now is about half that held at the start of this year.

Tom Bentz, an analyst at BNP Paribas in New York, said the latest price rise "appears to be a technical breakout".

Oil production in the Gulf of Mexico was still cut by about 480,000 barrels per day (bpd), or 29 per cent, three weeks after Hurricane Ivan hit the region, the US Minerals Management Service said earlier this week. Traders will focus today on the US crude inventory data, which is expected to show crude stocks rose last week by 2.2 million barrels. Mr Bentz said the remaining output still shut in the Gulf of Mexico "will likely offset the size of the build in crude stocks in Wednesday's Department of Energy report".

Tim Evans, an analyst at IFR Energy Services, said: "We see the fundamentals as much more normal than the price level would suggest, with the fear that supplies may not be normal in the future solely responsible for the divergence."

An unprecedented range of supply problems, ranging from Nigeria to Russia, have come together to keep the market continually on edge, analysts said.

On the positive side, however, it emerged yesterday that Iraqi oil exports rose in September to just over 1.8 million bpd from about 1.3 million bpd in August when sabotage attacks cut off shipments. It is thought that production from countries belonging to the Opec cartel rose 690,000 bpd to 30.15 million bpd in September, led by Iraq.

The Opec president, Purnomo Yusgiantoro, said yesterday that oil prices would fall below $40 per barrel in the first quarter of next year, despite strong demand, but only if security concerns ease in producing countries.

"The demand in the first quarter is still strong. However, I expect oil prices will come down if we eliminate non-fundamental factors, such as the situation in the Middle East, especially in Iraq," he said.