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Oil returns to $55 as winter stocks ebb
Updated: 2004-10-21 08:48

Oil prices charged back up to $55 a barrel on Wednesday as a fresh fall in U.S. heating oil stocks stoked worries over winter supplies.

U.S. light crude ended at $54.92 a barrel, up $1.63 on the day, after hitting a high of $55.20 on the New York Mercantile Exchange. On Monday it struck a record of $55.33.

In London, Brent crude rose $1.75 to end at $50.52 a barrel on the International Petroleum Exchange -- a rise of around 65 percent this year that the European Union on Wednesday warned would hurt economic growth.

Prices surged after the U.S. government reported that distillate stocks, including heating oil and diesel fuel, fell 1.9 million barrels last week to 119.0 million barrels.

U.S. distillate stocks have fallen for five straight weeks and are now nearly 10 percent below last year, the Energy Information Administration said in a weekly report.

Distillate consumption is running 4 percent above this time last year as solid U.S. economic growth drives diesel demand. New York heating oil futures hit a record high at $1.565 a gallon on Wednesday.

Consumers were also hit, with the average national price for heating oil rising by 8 cents over the past week to a record $1.988 a gallon, the U.S. Energy Department said. It was the third week in a row for retail prices to hit a record.

Only about 8 percent of U.S. homeowners use heating oil, but 78 percent of them are located in the heavy-consumption New England and Central Atlantic region.

The price of natural gas, the other main heating fuel, also rose to record highs in New York, with the front-month November futures contract hitting $7.75 per million British thermal units, the highest level since March last year.

U.S. fuel stocks normally grow at this time of year, but Hurricane Ivan in September battered oil and gas production and crude shipments in the Gulf of Mexico and hampered refining operations on the Gulf Coast.

About 25 percent, or almost 430,000 barrels per day, of oil production and 13 percent of natural gas production in the Gulf of Mexico remains shut, the U.S. Minerals Management Service said. U.S refineries have been working at less than 90 percent of capacity for the past month.

"We're not seeing enough pick-up in production or imports. This should be enough to support the whole energy complex through the balance of the week," said analyst Jim Ritterbusch of Ritterbusch and Associates.

Heating oil supplies are also running low in other key demand countries, such as Germany and Japan, the world's third-biggest oil consumer, where kerosene inventories are more than 10 percent below a year ago.

Oil shipments to Japan were disrupted on Wednesday by a typhoon, with six out of eight refiners reporting the suspension of shipping operations in southern, western and central areas of the country.

Prices had slipped back briefly early this week on evidence that this year's $20 surge may be starting to bite into economic growth and could dampen demand for oil next year.

The European Commission will revise downward its 2005 economic growth forecast because of soaring oil prices, Economic and Monetary Affairs Commissioner Joaquin Almunia said on Wednesday.

He voiced his concern before a meeting of euro zone finance ministers in Luxembourg, at which French Finance Minister Nicolas Sarkozy said he would propose joint EU action to ensure that high oil prices do not damage growth.

"Obviously, oil price increases and the general economic environment would suggest lower growth for next year, so our estimates will be revised downwards, I think, as a result," Almunia told a news conference.

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