Oil Prices Rise More Than $1 a Barrel

Tuesday October 11, 1:08 pm ET
By Brad Foss, AP Business Writer
Oil Prices Rise More Than $1 a Barrel As IEA Forecasts Drop in Energy Demand Will Moderate


WASHINGTON (AP) -- Crude oil prices rose more than $1 a barrel Tuesday after the International Energy Agency forecast that last month's drop in energy demand would moderate and some weather watchers predicted a colder-than-normal winter in the northeastern United States.

Energy futures also moved higher on persistent concerns about the pace at which oil and natural gas production -- and oil refining -- have recovered along the Gulf Coast in the aftermath of hurricanes Katrina and Rita.

Light sweet crude for November delivery climbed $1.05 to $62.85 a barrel on the New York Mercantile Exchange, where unleaded gasoline futures rose less than a penny to $1.81 per gallon.

On the International Petroleum Exchange, Brent crude futures rose 69 cents to $59.47 per barrel.

In its latest monthly report, the IEA blamed the September dropoff in motor fuel consumption on retail price spikes and sporadic supply shortages that followed Katrina and Rita. But the energy watchdog for industrialized nations said "October should be less affected as logistical disruptions subside."

The IEA report mirrored the thinking of some Wall Street analysts who have raised questions about recent Energy Department data showing a 2.6 percent decline in gasoline demand over the past month. "We believe the recent demand pullback is mostly a short-run response to a price spike, not a long-run shift in consumption patterns," Merill Lynch commodity analyst Francisco Blanch said in a report.

Energy futures prices have fallen from the highs reached immediately after the hurricanes, but there are still considerable bottlenecks in the Gulf Coast's output of oil, natural gas and gasoline. Eleven refineries accounting for roughly 3 million barrels per day of gasoline, heating oil and jet fuel production remain shut. And, as of Friday, 78 percent of daily oil production and 64 percent of daily natural-gas production in the Gulf of Mexico was down.

Cambridge Energy Research Associates said Tuesday that U.S. natural gas prices, which are already about double year-ago levels, will need to rise further in order to attract imports of liquefied natural gas. At the moment, the country's LNG import terminals are only operating at 50 percent of capacity, CERA analyst Bob Ineson said.

Adding to Tuesday's buying were concerns about higher-than-normal demand for home-heating fuels. Accuweather.com said in its 2005-2006 winter forecast that "colder-than-normal temperatures" were expected over the northeastern U.S., which consumes most of the country's winter heating fuel.

Nymex heating oil futures rose 2.02 cents to $1.992 a gallon, while natural gas futures jumped 38.5 cents to $13.36 per 1,000 cubic feet.

Energy prices rose throughout 2004 and 2005 because of rising demand, geopolitical unrest and ...

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