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The Independent (UK): Oil price falls after stockpiles are released by governments: Tuesday 6 September 2005

 

By Philip Thornton, Economics Correspondent

Published: 06 September 2005

 

Oil prices fell back yesterday, dropping below the levels seen before Hurricane Katrina wreaked havoc across the energy production industry in the Gulf of Mexico.

 

Traders in London reacted to Friday evening's decision by Western powers to release stockpiles of oil for the first time in 14 years to drive down crude costs.

 

The price of a barrel of oil dropped by more than a dollar, or 2.3 per cent, to $64.52 in London. The New York market, which was closed yesterday, is expected to follow suit. The International Energy Agency (IEA) decided on Friday its 26 member countries would release 2 million barrels per day (bpd) of oil for 30 days to compensate for the loss of US crude and refining output. It is the first time since the 1991 Gulf crisis that the IEA has tapped government oil stocks. But the fall came too late to prevent another rise in UK petrol prices, which jumped more than 2p a litre on Friday to hit 94.58p.

 

Meanwhile, a number of oil companies reported they had reopened facilities in the Gulf. BP said it had restarted production at some facilities shut down by Katrina, including the Holstein platform that produces 55,000 barrels a day. Royal Dutch Shell and Marathon Oil resumed processing at two refineries in Louisiana at the weekend.

 

David Thurtell, at the Commonwealth Bank of Australia, said: "Literally and figuratively, I think we've weathered the storm, as the release of strategic reserves has calmed the market."

 

In the UK, the AA Motoring Trust warned it could not rule out average petrol prices hitting a pound a litre. A spokesman said it could take as little as another hurricane warning for the Gulf to trigger another speculative round of buying that would push up the price. Crude prices hit a record $70.85 a barrel last week, and in some rural areas petrol is already more than 1 a litre. Petrol prices on UK forecasts rose to an average of 94.58p on Friday, up from Thursday's 92.29p. Diesel prices have risen to 97.27p. "Most retailers will resist putting up prices over a pound a litre," the AA Motoring Trust spokesman said.

 

Analysts fear that rising fuel prices on both sides of the Atlantic will deal a fresh blow to beleaguered retailers by crimping households' disposable incomes. Business organisations blamed rising fuel costs yesterday for a drop in retail sales and service sector growth.

 

Oil prices fell back yesterday, dropping below the levels seen before Hurricane Katrina wreaked havoc across the energy production industry in the Gulf of Mexico.

 

Traders in London reacted to Friday evening's decision by Western powers to release stockpiles of oil for the first time in 14 years to drive down crude costs.

 

The price of a barrel of oil dropped by more than a dollar, or 2.3 per cent, to $64.52 in London. The New York market, which was closed yesterday, is expected to follow suit. The International Energy Agency (IEA) decided on Friday its 26 member countries would release 2 million barrels per day (bpd) of oil for 30 days to compensate for the loss of US crude and refining output. It is the first time since the 1991 Gulf crisis that the IEA has tapped government oil stocks. But the fall came too late to prevent another rise in UK petrol prices, which jumped more than 2p a litre on Friday to hit 94.58p.

 

Meanwhile, a number of oil companies reported they had reopened facilities in the Gulf. BP said it had restarted production at some facilities shut down by Katrina, including the Holstein platform that produces 55,000 barrels a day. Royal Dutch Shell and Marathon Oil resumed processing at two refineries in Louisiana at the weekend.

 

David Thurtell, at the Commonwealth Bank of Australia, said: "Literally and figuratively, I think we've weathered the storm, as the release of strategic reserves has calmed the market."

 

In the UK, the AA Motoring Trust warned it could not rule out average petrol prices hitting a pound a litre. A spokesman said it could take as little as another hurricane warning for the Gulf to trigger another speculative round of buying that would push up the price. Crude prices hit a record $70.85 a barrel last week, and in some rural areas petrol is already more than 1 a litre. Petrol prices on UK forecasts rose to an average of 94.58p on Friday, up from Thursday's 92.29p. Diesel prices have risen to 97.27p. "Most retailers will resist putting up prices over a pound a litre," the AA Motoring Trust spokesman said.

 

Analysts fear that rising fuel prices on both sides of the Atlantic will deal a fresh blow to beleaguered retailers by crimping households' disposable incomes. Business organisations blamed rising fuel costs yesterday for a drop in retail sales and service sector growth.

 

http://news.independent.co.uk/business/news/article310613.ece

 

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