Warming up the oil

Energy prices begin to rise as cold weather approaches

With the onset of cold weather, oil prices seem to have changed their trend again and started to grow. In recent days they have reached the “bottom” - they have dropped to a four-month low. According to experts, the reason for the drop in quotes was the unusually warm weather for this fall. But tomorrow weather forecasters are predicting a sharp cold snap in the northern states of America. Consumption of petroleum products will increase, and oil prices will go up again. Yesterday, with the opening of trading on the New York Stock Exchange, they already began a smooth rise - at the time of signing the issue, they increased by 12 cents, to $57.65 per barrel, compared to the close of the session on Friday.

At the end of August, oil prices on the New York Stock Exchange reached $70.85 per barrel - this was a historical record. The reason for the current situation was Hurricane Katrina, which swept over the Gulf of Mexico, where a quarter of the oil produced in America is produced. Mining in the region stopped for several weeks due to significant damage to infrastructure. In addition, the hurricane destroyed part of the oil refineries. As a result, the States were forced to open the state strategic oil reserve. True, this still did not help to avoid the gasoline crisis: due to a lack of refining capacity, fuel prices in some states have risen significantly. Two more hurricanes that followed Katrina, although they did not cause significant damage, did not allow stock prices to fall.

In October, the situation changed: high oil prices still had an impact on consumption. “The growth rate of demand this year turned out to be two times lower than last,” states Troika Dialog analyst Valery Nesterov. In recent weeks, oil reserves of private companies have been continuously growing. According to the latest report from the US Department of Energy, published last week, oil reserves in the country increased by 4.5 million, to 323.6 million barrels, and gasoline reserves by 4.2 million, to 201.1 million barrels.

At the same time, heating oil inventories fell by 1.5 million to 52.5 million barrels. In addition, world oil production now exceeds consumption by only 75 million tons per year, and buyers are constantly afraid of a shortage of raw materials in the event of natural or socio-political disasters in oil-producing regions. There is also still a lack of processing capacity. “In America, the procedure for obtaining permission to build a plant is bureaucratic, and in Europe they have not yet forgotten how in the 80s refineries had to be closed - the excess capacity reached 30%,” says Mr. Nesterov. “For companies to want to invest in refining, high fuel prices need to last a couple more years.” It is for these reasons that the expert sees no reason for a further decline in the price of oil and, on the contrary, considers it quite possible to conquer new price heights.

Meanwhile, in the UK there was another wave of apocalyptic forecasts for gas prices, which, as is known, correlate with oil prices with some time lag. As Bloomberg reports, Ineos Group Holdings manager Andy Waring, who is responsible for purchasing energy resources for the group's factories, said that gas prices in the country have almost doubled since the beginning of 2005 and this is far from the limit. Traders are racing to prepare for expected gas supply shortages ahead of the winter season as North Sea production dwindles and market demand rises. According to Mr. Waring, gas prices in Britain could reach $460 per thousand cubic meters, which is five times higher than current New York prices and equivalent to $400 per barrel of oil. He noted that in this regard, Ineos Group Holdings may reduce production at one of the plants in order to save gas and then sell it to utility companies.

Denis REBROV