Oil hits $75 as hurricane fears brew

Matthew Robinson
Reuters
Tuesday September 4, 2007

Oil jumped $1 past $75 a barrel on Tuesday as a top U.S. hurricane forecaster called for a busy end to the Atlantic storm season, raising concerns over potential oil and gas disruptions.

U.S. crude rose $1.00 to $75.04 by 2:01 p.m. EDT after trading as high as $75.13. London Brent crude was up 50 cents at $73.91 a barrel.

Hurricane Felix slammed into Central America on Tuesday, sparing oil and gas installations in the Gulf of Mexico. But forecasters at Colorado State University said the rest of the 2007 Hurricane season would be busy, with a total of 15 named storms.

U.S. and Mexican oil installations have escaped major storm damage so far this year, but markets remained on edge after hurricanes knocked out refining and offshore production facilities in 2005.

Prices, which are closing in on the record high of $78.77 for U.S. oil struck on August 1, also drew support from comments from some OPEC members that the producer group is likely to keep output levels unchanged when it next meets on September 11.

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"While the threat posed by Felix has receded with the Hurricane set to pass south of oil production facilities in the Gulf of Mexico, concerns over OPEC's behavior persist and are likely to intensify ahead of OPEC's gathering next Tuesday," a Barclays Capital report said.

But an OPEC source on Tuesday said the cartel could boost output by up to 1 million barrels per day (bpd) later in 2007, when some analysts forecast supply could have trouble keeping up with demand.

"If things stay as they are, I believe we need to increase by 500,000 barrels per day to 1 million bpd," said the source, who declined to be identified by name.

"Perhaps in December, depending on the stocks."

OPEC kept output flat in August, according to a Reuters survey. The group last year agreed to cut output by 1.7 million bpd.

The only member suggesting the possibility of an imminent supply boost was Indonesia, OPEC's second smallest producer.

"If current high prices are due to inadequate supply, then we will propose current production level increase," Indonesia's OPEC governor Maizar Rahman told Reuters on Tuesday.

(Additional reporting by Peg Mackey and Alex Lawler in London; Neil Chatterjee in Singapore)

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