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Explosion At 3rd Largest U.S. Oil Refinery, OPEC To Cut Output

Gasoline in New York rose to its highest price in at least 18 years after an explosion at BP Plc's Texas City refinery, the third biggest in the U.S., added to concern about shortages of the fuel ahead of the third quarter when demand peaks.

BP said an explosion caused a fire in a gasoline unit at its 470,000 barrel-a-day refinery, about 30 miles south of Houston. Fire crews are working to extinguish the blaze, said Annie Smith, BP's manager of public affairs for the Gulf Coast region in Texas. She said she didn't know what caused the blast.

``This refinery is a major supplier of gasoline,'' said Kurt Barrow, an oil and gas consultant at Purvin & Gertz Inc. in Singapore. ``If this unit is out of service for an extended period of time, say one week to a month, then that's bullish for gasoline. The second quarter is critical to gasoline production and inventory building ahead of the U.S. driving season.''

At their meeting in Vienna, ministers from the oil producers' cartel Opec have said they will go ahead with a planned oil output cut.
 http://quote.bloomberg.com/apps/news?pid=10000103&sid=azfRXYlvGT6w&refer=news_index

Gasoline Rises to 18-Year High After Fire at Texas BP Refinery

March 31 (Bloomberg) -- Gasoline in New York rose to its highest price in at least 18 years after an explosion at BP Plc's Texas City refinery, the third biggest in the U.S., added to concern about shortages of the fuel ahead of the third quarter when demand peaks.

BP said an explosion caused a fire in a gasoline unit at its 470,000 barrel-a-day refinery, about 30 miles south of Houston. Fire crews are working to extinguish the blaze, said Annie Smith, BP's manager of public affairs for the Gulf Coast region in Texas. She said she didn't know what caused the blast.

``This refinery is a major supplier of gasoline,'' said Kurt Barrow, an oil and gas consultant at Purvin & Gertz Inc. in Singapore. ``If this unit is out of service for an extended period of time, say one week to a month, then that's bullish for gasoline. The second quarter is critical to gasoline production and inventory building ahead of the U.S. driving season.''

Gasoline for April delivery rose as much as 1.8 percent to $1.1770 a gallon in after-hours trading on the New York Mercantile Exchange, the highest since at least 1986, according to Bloomberg data. Prices have risen 25 percent in the past year. Crude oil for May delivery rose as much as 1.4 percent to $36.75 a barrel.

The fire follows a March 25 alert from the Federal Bureau of Investigation that terrorists may attack refineries in Texas. BP spokesman Scott Dean said ``we have no reason to believe that it's any sort of attack.''

Crude oil for May delivery traded up 45 cents, or 1.2 percent, at $36.70 a barrel at 2:55 p.m. Singapore time. Brent crude oil for May settlement on London's International Petroleum Exchange rose as much as 55 cents, or 1.7 percent, to $33.00 a barrel. Prices have risen 24 percent in the past 12 months.

Terrorism, OPEC

``The fear is that maybe this is a terror attack,'' said Anthony Nunan, a manager of international petroleum business at Mitsubishi Corp. in Tokyo. ``People feel it's better to be safe than sorry and are buying oil.''

The oil-price gain adds to a 2.3 percent increase yesterday after six OPEC ministers said the group should proceed with production cuts to prevent prices sliding in the second quarter.

Ministers from Saudi Arabia, Iran, Venezuela, Libya, Qatar and Algeria said the Organization of Petroleum Exporting Countries at its Vienna gathering today should trim quotas by 1 million barrels a day, or 4.1 percent, starting tomorrow.

Kuwait's minister, Sheikh Ahmad Fahd al-Ahmad al-Sabah, yesterday called on OPEC to postpone the cuts until June because of rising prices. The United Arab Emirates minister, Obaid bin Saif al-Nasseri, said a delay is one option to be discussed.

Gasoline Shortages

The fire at BP's Texas refinery increased concern about U.S. gasoline shortages before the peak demand season in the third quarter. The average retail price for gasoline reached a record $1.758 a gallon, the Energy Department said Monday, and exceeded $2 a gallon in California, the most populous U.S. state.

``If it's anything to do with gasoline production then that's bad news,'' said Mitsubishi Corp.'s Nunan.

Gasoline prices are becoming a political issue in the U.S. seven months before Massachusetts Senator John Kerry, 60, and President George W. Bush, 57, face each other in the general election.

Surging gasoline prices have increased pressure on Bush to seek ways to relieve consumers of increasing energy costs. Kerry plans to call on Bush to pressure OPEC to pump more and to stop filling the nation's strategic reserves as a way to check rising gasoline prices.

Supplies Falling

U.S. gasoline supplies probably fell by 500,000 barrels last week from 199.5 million barrels, based on the median forecast of a Bloomberg survey of 11 analysts. Inventories have declined in eight of the past nine weeks, according to the Department of Energy. U.S. motor-fuel demand peaks during the summer when automobile traffic increases.

The department will release its weekly report on petroleum inventories in Washington at 10:30 a.m.

The FBI on March 25 alerted refineries in Texas, including those operated by Exxon Mobil Corp., that their facilities may be targeted for attacks.

The threats were nonspecific, without ``a timeframe, a date, location or methods,'' Bob Doguim, an agency spokesman in Houston, said. ``It was specific enough on Texas and refineries, so we disseminated the information as quickly as we got it.''


To contact the reporter on this story:
Sri Jegarajah in Singapore at  sjegarajah@bloomberg.net

To contact the editor on this story:
Peter Langan at  plangan@bloomberg.net

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 http://news.bbc.co.uk/1/hi/business/3584615.stm

Last Updated: Wednesday, 31 March, 2004, 18:28 GMT 19:28 UK

Opec to go ahead with output cuts

Most members support the cut

Ministers from the oil producers' cartel Opec have said they will go ahead with a planned oil output cut.

President George W Bush said he was "disappointed" with Opec's refusal to reverse last month's decision.

Opec had been under pressure not to cut output by 4%, or one million barrels per day, from 1 April.

In the US, where oil is trading near a 13-year high, the high cost of petrol is becoming an election issue, and some fear oil could reach $40 a barrel.

Hot potato

The democratic challenger, John Kerry, has criticised President George W Bush, insisting he is doing nothing to reduce petrol prices.

The Bush administration however has accused Mr Kerry of wanting to raise tax on petrol, and stressed it has been having talks with Opec members.

Petrol prices at the pump in the US have risen to an average of about $1.79 per gallon, more than 5 cents up on a year ago, according to figures from the American Petroleum Institute.

Rising demand

Tom James, director of commodity derivatives at Tokyo-Mitsubishi International, said fuel prices have been lifted by rising global demand for oil as well as the threat of Opec output cuts.

"We're seeing a bit of a struggle here between the east and the west in terms of the demand for Opec crude oil," he told the BBC's World Business Report.

"In China, crude oil imports have risen by 30% year on year, and this has pushed prices higher as well."

In the US, light, sweet crude stood at $38.35 per barrel on 17 March, its highest level in 13 years.

Crude oil prices are expected to remain above $30 per barrel in the foreseeable future, having risen 10% so far this year.

Crude is trading 15% above 2003's average price.

Changing policy

One factor in Opec's decision was that oil prices are denominated in dollars, and the falling value of the dollar on international currency markets has reduced the real value of the oil revenue of Opec members.

Some analysts say a production cut is likely to push prices for crude oil to well above $40 a barrel.

That could push the global economy into a slump, and Opec, in turn, could suffer as well if a downturn ends up driving down demand for oil.

So far, most European countries have not yet felt the impact of high oil prices, because they have been compensated by the decline of the dollar against the euro and other currencies.

Brent crude for May delivery traded up 19 cents at 32.64 per barrel in London while US crude for May delivery traded at $36.14 per barrel during the afternoon ahead of the cut.