WASHINGTON – Oil prices rose Monday after BP PLC (BP) said output from a massive Gulf of Mexico platform damaged by last year's Hurricane Dennis would not be restored until mid-2008, at the earliest.
Analysts said the BP news did not cause the rally by itself, though it may have magnified a technical bounce that began Friday following nearly 2 straight weeks of declines.
"You can't go down every day," said BNP Paribas Commodity Futures broker Tom Bentz. "We needed to recover a little bit."
BP's Thunder Horse platform, which has the capacity to produce as much as 250,000 barrels per day of oil and 200 million cubic feet a day of natural gas, had been expected to be running by early 2007. But the London-based company announced Monday that new subsea equipment failed during a test and that it will need to be rebuilt.
Light sweet crude for October delivery climbed 47 cents to settle at $63.80 a barrel on the New York Mercantile Exchange
Despite Monday's gains, energy futures have been in a tailspin in recent weeks due to a combination of soaring global inventories, a weakening U.S. economy and a perception of reduced geopolitical and hurricane threats.
On Friday, the Organization of Petroleum Exporting Countries said fourth-quarter demand for its oil would be 320,000 barrels a day lower than previously forecast, or 28.86 million barrels per day.
Analysts say there has been a shift in energy-market psychology since prices peaked above $78 in July, as traders focus on the relatively comfortable balance between supply and demand as opposed to the hypothetical supply threats.
Still, a senior Iranian official warned against international sanctions over its nuclear program on Monday, saying Tehran would respond to such "hostile action" over his country's refusal to freeze uranium enrichment by cutting international inspections.
Iranian Vice President Reza Aghazadeh issued the threat amid urgings by the head of the U.N. nuclear monitoring agency for a start to talks between Iran and six world powers on easing world concerns that Tehran could be seeking to make an atomic bomb.
In other Nymex trading, heating oil futures gained 2.34 cents to settle at $1.7141 a gallon, while gasoline futures rose less than penny to settle at $1.5796 per gallon. Natural gas futures fell 4 cents to settle at $4.942 per 1,000 cubic feet.