LONDON: Oil rose above US$61 a barrel in New York after Saudi Arabia's King Fahd, ruler of the world's largest oil exporter, died, heightening concern about supplies following refinery disruptions in the United States and Europe.
The Saudi throne, held by Fahd for 23 years, will pass to his half-brother, Abdullah Abdulaziz al-Saud, Saudi State Television said. Prices had already gained after BP Plc shut a refinery unit in Texas.
“It's a combination of today's news about the king's death and all these refinery outages that just keep coming,'' said Edward Meir, a commodity analyst at Man Financial Ltd in Darien, Connecticut. “It's hard to make the case for a substantial retreat'' in oil prices this week.
Crude for September delivery rose as much as 66 cents, or 1.1%, to US$61.23 a barrel on the New York Mercantile Exchange, its highest since July 13 and within US$1 of a record US$62.10, reached on July 7. It was up 51 cents at 12:30pm London time and has gained 39% from a year ago.
Oil climbed 3.3% last week on concern that US refiners will struggle to produce enough fuels such as petroleum and diesel as heating requirements increase, sending demand to its yearly peak during the fourth quarter. BP's Texas City refinery had an explosion on July 28, which shut three processing units, the second incident at the plant since March.
As idle refining capacity dwindles, some processing plants are breaking down.
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Murphy Oil Corp had a fire at its Mereaux, Louisiana, plant last week, after Russia's OAO Novo-Ufimsky refinery experienced a pipeline blast. Royal Dutch Shell Plc shut its Pernis refinery and chemicals plant in the Netherlands for four days last month after a power cut.
Saudi Arabia is the largest producer in the Organisation of Petroleum Exporting Countries (Opec), which supplies about 40% of the world's oil. The kingdom is the only member of the 11-country group that has enough spare capacity to compensate for an output disruption of about one million barrels a day.
“The market got a bit jittery'' after the news of the King's death, said Robert Montefusco, a broker at Sucden UK Ltd here. Still, Saudi Arabia has “been saying it's the same policy going forward. The market will be looking more at refinery problems or supply issues.'' – Bloomberg
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