Aug. 5 (Bloomberg) -- Crude oil futures in New York surged to a record for a fifth session on concern spare production capacity isn't available to substitute for a possible disruption of shipments from OAO Yukos Oil Co., Russia's biggest exporter.
Russia's Justice Ministry banned Yukos from using its accounts to finance operations. Prices fell yesterday after the ministry sent a letter to the company permitting it to use the accounts, which had been frozen over a $3.4 billion tax bill. The threat comes as the Organization of Petroleum Exporting Countries pumps close to capacity.
``Demand is strong, and as long as there is a great fear about supply in the fourth quarter prices will be high,'' said John Kilduff, senior vice president of energy risk management at Fimat USA Inc. in New York. There's reluctance to sign contracts with Yukos, ``a company that's teetering on the edge of insolvency,'' Kilduff said.
Crude oil for September delivery was up $1.42, or 3.3 percent, at $44.25 a barrel at 1:02 p.m. on the New York Mercantile Exchange. Prices reached $44.40 a barrel, the highest since futures began trading in New York in 1983. Prices were 37 percent higher than a year earlier.
In London, the September Brent crude oil futures contract was up $1.40, or 3.5 percent, at $41.10 a barrel on the International Petroleum Exchange. Prices reached $41.30, the highest intraday price since the contract began trading in 1988.
``The high price of oil is having a big effect on the economy,'' said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis. ``Wal-Mart and other retailers are saying that the high price of gasoline has impacted consumer spending.''
U.S. retailers' sales at stores open at least a year increased 3.3 percent, the second-slowest gain in nine months, according to the International Council of Shopping Centers survey of 65 retailers. Wal-Mart Stores Inc. sales climbed 3.2 percent from a year earlier, the second-smallest increase in 13 months.
Gasoline for September delivery was up 4.01 cents, or 3.3 percent, at $1.2435 a gallon in New York. Prices reached $1.47 on May 20, the highest since the contract began trading in 1984. Futures were 30 percent higher than a year earlier.
``We've actually weathered the high energy prices rather well so far, but if they persist economic growth will slow,'' Reaser said. ``For every $10 increase there will be a 0.5 percent decline in growth. If prices hit $50 and stay at that level growth would fall to 3 percent, which won't be catastrophic but will prevent the creation of new jobs.''
Yukos Chief Executive Steven Theede said last week the company may have to halt some oil output this month as the freeze on bank accounts could prevent Yukos from paying for rail shipments that carry a quarter of its production of 1.6 million barrels a day. The company pumps as much oil as OPEC member Libya.
The Justice Ministry said it withdrew a letter it had sent to Yukos permitting the company to use accounts that had been frozen over the tax dispute.
``Yesterday's explanatory note that accounts may be used was withdrawn because it contradicts legal norms,'' said Boris Kalyagin, head of public relations at the Justice Ministry, in a telephone interview.
Oil in New York has jumped 36 percent this year in part on concern that exports will be disrupted from OPEC members Iraq, Saudi Arabia and Nigeria and non-OPEC Russia.
``Continuing and possible problems in Iraq, Saudi Arabia, Nigeria, Norway, and just about every other big exporter will keep us on edge,'' said Nauman Barakat, senior vice president at Refco Energy Markets in New York. ``Demand is growing faster than supply.''
Oil prices may reach $50 a barrel in New York because of strains on production capacity, Barclays Capital, the securities unit of Britain's third-largest bank, said as it raised its price forecasts.
``It is possible that oil prices could rise to $50 temporarily,'' Barclays commodity analyst Kevin Norrish said in a telephone interview in London.
Barclays raised its fourth-quarter average forecast by $4.20, to $44.60, and the third-quarter outlook by $5.40 to $42.90, according to the estimates made by Norrish and Paul Horsnell. The 2004 average U.S. price, based on West Texas Intermediate crude oil, was increased to $40.30 from $37.90.
``What's moving the market now is not where inventories are now but where they could be going to in the fourth quarter,'' Norrish said. ``It looks unlikely that supply can satisfy the likely level of demand for the fourth quarter, so we need substantial stockpile builds and/or significantly higher prices that would reduce demand.''
World oil demand tends to peak during the last two months of the year as refiners boost production of heating fuels for the cold-weather months in the Northern Hemisphere.
The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department. That's almost $73 in 2004 dollars. In 1974, a barrel of oil averaged $9.07, which would be about $34.50 today. Prices surged that year after the Arab oil embargo that followed the Arab-Israeli war of 1973.
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