Oil prices fall from record highs as refinery concerns ease
By Michael J. Martinez Associated Press Writer
NEW YORK (AP) – Oil prices fell sharply Monday as fears over refinery breakdowns eased after an uneventful weekend, though crude futures remained above $66 per barrel.
Light, sweet crude for September delivery dropped 59 cents to settle at $66.27 per barrel on the New York Mercantile Exchange. On Friday, the contract had peaked at $67.10 before settling at $66.86, up $1.06 from Thursday’s close.
Gasoline fell more than 4 cents to $1.9621 per gallon, while heating oil slid about 31/2 cents to $1.8692 per gallon.
At London’s International Petroleum Exchange, September Brent futures were down 88 cents at $65.58 per barrel.
Unlike the past eight months of rising oil prices, prompted by long-term supply and demand outlooks, oil’s recent push into the mid-$60 per barrel range was due to concerns about refinery outages in the United States.
“This is a very different rally in crude oil than we’ve seen before,” said Francisco Blanch, senior energy strategist at Merrill Lynch in London. “This was based on fears of a breakdown in immediate deliverability, a very short-term outlook.”
Those fears eased Monday even as refineries recovered from a terrible streak of luck last week, with a rash of breakdowns at a dozen U.S. refineries representing 16 percent of the total U.S. refining capacity.
The outages late last week included several units at ConocoPhillips’ 306,000 barrel-a-day Wood River, Ill., refinery, which were shut after a thunderstorm caused a power failure. Also, Premcor Inc.’s 190,000-barrel-a-day refinery in Memphis, Tenn., was closed due to a power outage.
Oil prices, which are 46 percent higher than a year ago, had risen nearly $10 a barrel over the past three weeks ending Friday. But futures would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980.
While it appeared oil was not immediately headed that high, Blanch said it would be difficult for crude futures to move sharply lower, since the forecast for global demand remains high.
“The only way you’re going to see lower prices is when you see lower demand, and that appears unlikely,” Blanch said. “The recent rise in U.S. auto sales, for example, can only mean higher demand until prices rise enough so that people cut back on driving.”
Oil traders also monitored the situation in Iran with increasing concern. Iran has become increasingly defiant in its desire to resume its uranium enrichment program, and the government there called for European talks on restarting the program despite U.S. warnings.
The new Iranian President Mahmoud Ahmadinejad, meanwhile, named a hard-line Cabinet, a move that looked certain to intensify Iran’s confrontation with Western governments, who have threatened to impose sanctions on Iran through the United Nations to force it to cease uranium enrichment.
“If the United States and the United Nations impose sanctions on Iran for nuclear processing, Iran would cut back on oil producing and that would be a nasty outlook for the world economy,” said David Thurtell, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Iran, which pumps 4 million barrels daily, is the second-largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.
An Iranian official has projected revenues from oil exports this year at $43 billion, the largest since Iran began exporting oil 98 years ago, citing current high prices.
___
Associated Press Writer Gillian Wong in Singapore contributed to this report.
AP-ES-08-15-05 1556EDT