NEW YORK – Oil prices neared $49 a barrel Friday, capping a rise of 7 percent for the week, as Gulf of Mexico crude production rebounded at a slower-than-expected rate in the wake of Hurricane Ivan.
Light crude for November delivery rose 42 cents to settle at a new high of $48.88 per barrel on the New York Mercantile Exchange (search). The price of oil is up 73 percent from a year ago.
The federal Minerals Management Service (search) reported Friday that daily oil production in the Gulf remains 27 percent below normal at about 1.2 million barrels per day — the same level as Thursday. The agency said 10 million barrels of oil, the equivalent of 1.7 percent of annual production in the region, have been lost since last Monday, when offshore producers began evacuating crews.
"There continues to be hope for a quicker rebound in output," said John Kilduff, senior oil analyst at Fimat USA in New York. "Today's figures confirmed that little or no progress was made yesterday."
While the domestic supply problems caused by Hurricane Ivan are expected to be short-lived, analysts said underlying tightness in global oil markets is not.
The amount of excess oil production available worldwide is about 1 percent of total demand of about 82 million barrels a day, leaving the industry little breathing room in the event of a prolonged supply interruption, according to many analysts.
Potential output disruptions in Iraq, Russia and other key oil-producing nations have kept oil traders jittery. For example, one factor that may have contributed to Friday's rise in prices was violence in Nigeria that forced Royal Dutch/Shell Group, which accounts for roughly half the country's daily exports of 2.5 million barrels, to evacuate two oil facilities. Shell said there has been no disruption to its production and exports.
U.S. oil supplies typically grow this time of year as gasoline demand tapers off and refiners briefly shut down to perform maintenance. Instead, over the past two weeks the nation's supply of crude has fallen by 16.1 million barrels due to Ivan-related disruptions to oil production and shipping, according to the Energy Department (search).
Refiners have had to use oil held in storage to produce gasoline, heating oil and other fuels. To help several refiners in a supply pinch, the Energy Department has agreed to lend them oil from the nation's emergency stockpile. The last time this was done was October 2002, after Hurricane Lili.
However, analysts expect these fuel loans to have limited impact on prices.
Friday's closing price was 18 cents above the previous peak Nymex settlement price of $48.70, set on Aug. 19. Adjusting for inflation, today's prices are still about $8 below the level reached just before the first Gulf War.
A week ago, front-month crude futures settled at $45.59 per barrel.
While the price of oil has been high all year, the march toward $50 a barrel did not begin in earnest until late summer, due to the combined effects of oil-pipeline sabotage in Iraq and fears of reduced output in Russia, where oil giant Yukos has become squeezed for cash as it repays the government $3.4 billion in back taxes.
Most recently, oil traders have been tense over shrinking domestic inventories of fuel after Hurricane Ivan caused disruptions to production, shipping and refining in and around the Gulf of Mexico.