Oil prices jumped $1 a barrel to a new high yesterday after the death of Saudi Arabia's King Fahd raised concerns about the kingdom's long-term...
WASHINGTON — Oil prices jumped $1 a barrel to a new high yesterday after the death of Saudi Arabia’s King Fahd raised concerns about the kingdom’s long-term political stability. The rally, which faded late in the day, also stemmed from traders’ skittishness about U.S. refinery glitches and Iran’s nuclear program.
Light sweet crude for September delivery briefly rose as high as $62.30 a barrel on the New York Mercantile Exchange, then retreated to settle at $61.57, a rise of $1. The previous closing high on Nymex was $61.28, set July 6, while the previous intraday high was $62.10.
Oil prices still are well below the inflation-adjusted high of about $90 a barrel set in 1981.
Saudi Arabia said its oil policy will not change now that power has formally shifted to Fahd’s 81-year-old brother, the de facto leader during the past decade. However, with oil consumption rising around the world and only a limited amount of excess production capacity available, energy traders are easily put on edge by a change in the weather in an oil-pumping region, let alone a transfer of authority within the world’s biggest oil producer.
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“The market is hypersensitive to facts, rumors and noise because the supply cushion is gone,” said Larry Goldstein, president of the New York-based nonprofit Petroleum Industry Research Foundation.
Traders also kept an eye on refinery operations in the United States, where the rate of output has fallen to about 93.5 percent of capacity, down from 98.1 percent of capacity over the past three weeks, in part because of hurricane-related power outages. Last week, two refinery fires — one in Texas, one in Louisiana — stifled production, albeit to a limited extent.
Antoine Halff, director of global energy at Eurasia Group in New York, described the oil market’s response to Fahd’s death as “a bit of a knee-jerk reaction,” but not an entirely surprising one given Saudi Arabia’s importance to the global economy.