Refinery shutdown sends crude higher

Threat by Venezuelan president to shut supplies add further tension

Crude prices rose substantially today, Monday, 11 February, 2008. This was crude’s third consecutive rise. Prices rose due to a couple of factors. Threat by Venezuelan President to cut off oil supplies to US and shutdown of a refinery by Valero Energy were the major reasons for this rise.

Crude-oil futures for light sweet crude for March delivery today closed at $93.59/barrel (higher by $1.82/barrel or 2%) on the New York Mercantile Exchange. They rose to an intraday high of $94.72 earlier. The contract also fell to an intraday low of $90.92 in earlier trading on economic worries.

Crude prices rose today after Valero Energy shut its Delaware refinery because of a storm-related power failure yesterday and cold weather moved across the northern U.S.

On the other side, Venezuelan President Hugo Chavez today threatened to cut off oil supplies to the U.S. in retaliation of Exxon Mobil’s legal action to freeze Venezuela's assets. Venezuela is South America's second largest oil producer and one of the world's top exporters to the U.S.

Brent crude oil for March settlement today rose $1.59 (1.7%) to $93.53 on the London-based ICE Futures Europe exchange. The London benchmark rose 54% in FY 2007, the most since 1999 when prices more than doubled.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude’s biggest yearly gain in five years.

Natural gas gains for sixth straight day; Prices increase more than 10% in February

Natural gas advanced to the highest in three months on forecasts that colder weather will linger into next week and speculation the U.S. economy may soon rebound, lifting demand. Natural gas for March delivery rose 23 cents (2.8%) to settle at $8.531 per million British thermal units.

Today’s rise was the sixth consecutive rise for natural gas. Prices have increased more than 10% in February 2008 itself.

Against this backdrop, March reformulated gasoline added 3.9 cent to $2.3962 a gallon, and March heating oil rose 5.03 cents to $2.6044 a gallon.

Last Friday, two ministers of Organization of Petroleum Exporting Countries (OPEC) hinted that the cartel might go for a production cut in its next meeting at March, 2008. This spurted up crude prices and the same ended almost 4% higher on that day. At its 1 February meeting at Vienna, OPEC members decided to keep current output levels unchanged.

At the MCX, crude oil for February delivery closed at Rs 3,715/barrel, higher by Rs 107 (2.9%) against previous day’s close. Natural gas for February delivery closed at Rs 340.5/mmtbu, higher by Rs 15.2/mmtbu (4.7%).