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Oil rises to near $72 after Bernanke comments
SINGAPORE – Oil prices rose to near $72 a barrel Tuesday in Asia after Federal Reserve Chairman Ben Bernanke said he's hopeful the world's No. 1 economy won't fall back into a "double dip" recession.
Benchmark crude for July delivery was up 31 cents to $71.75 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost 7 cents to settle at $71.44 on Monday.
All major Asian stock markets rose modestly Tuesday after Bernanke said he expected the U.S. economic recovery to continue. Bernanke spoke late Monday after the Dow Jones industrial average dropped 1.2 percent.
A rising euro, off recent 4-year lows, also helped support oil prices. The euro gained to $1.1963 on Tuesday from $1.1916 on Monday, making crude cheaper for investors holding the European currency.
Storms could disrupt oil operations in the Gulf of Mexico and boost prices as this year's hurricane season starts this month.
"As soon as the dollar drops, equity markets recover and the hurricanes hit the Gulf of Mexico, we could see a perfect storm for higher crude oil prices," energy consultancy the Schork Group said in a report.
In other Nymex trading in July contracts, heating oil rose 0.59 cent to $1.9742 a gallon and gasoline gained 0.71 cent to $2.0020 a gallon. Natural gas was up 5.5 cents at $4.971 per 1,000 cubic feet.
Brent crude was up 16 cents at $72.28 a barrel on the ICE futures exchange.
US oil disaster could increase oil cost
Posted: 06 June 2010 1131 hrs
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 An oil rig extracts crude in Taft, California |
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LONDON: The problems British oil giant BP faces in controlling a massive oil spill in the Gulf of Mexico highlight the dangers of working in such deep waters which the industry will have to come to terms with.
"What is taking place is an issue which will impact the global oil and gas industry and will necessarily have a very broad impact not only in the United States but around the world," BP chief executive Tony Hayward warned Friday.
BP's costs in combating the worst environmental disaster in US history have already run up to around one billion dollars and could go many times higher, prompting ratings agencies to downgrade the company's prospects.
The wider fallout could see higher industry costs for oil, with prices for the consumer rising as a result.
"Events in the Gulf of Mexico have demonstrated that drilling for oil in water depths of one mile (1.6 km) ... is rather like putting a man on the moon," said David Hufton of PVM.
"The technology to find the oil at such depths ... exists but the technology to cope with a disaster at such (depths) is lacking," Hufton added.
For the oil industry, one immediate impact has been Washington's decision to ban any new drilling in the Gulf of Mexico for six months, and the delay in several projects off Alaska.
In themselves, such moves should not be so important but they raise new uncertainties for the business, complicating planning for what can be hugely costly and difficult projects.
"The ultimate outcome, we believe, will be slower development of deep water prospects and higher costs, supporting higher oil prices in the longer term," said Helen Henton of Standard Chartered Bank.
"There is now considerable uncertainty over the future of deep water exploration, both in the US and elsewhere ... more rigorous enforcement of safety and environmental standards will raise the operating and insurance costs," Henton said.
The Gulf of Mexico accounts for 19 per cent of US oil reserves, of which most lie in deep water, and contributes 29 per cent of US national oil production, she added.
What has happened there may complicate exploitation of the vast reserves put at 50 billion barrels of oil off the cost of Brazil in water depths up to seven kilometres, a huge technical challenge.
"Much of our future supplies were supposed to come from deep water drilling," said Hufton of PVM.
"The environmental risks are now all too apparent. Perhaps the US public will accept that it is worth paying much higher prices to have the risks removed elsewhere," he added.
The shift offshore and then into ever deeper waters is seen by many as essential to make up for falling production on land, with the major oil companies struggling to maintain and increase their reserves.
"The world's demand for energy is continuing to grow and so is that in the United States," Hayward said.
"The world needs the contribution of oil from the deep water and America can benefit hugely from the resources of the Gulf of Mexico but we need to prevent anything like this spill from ever happening again anywhere in the world."
