LONDON -- Oil prices rose back hit $61 a barrel on Wednesday, with a tropical storm in the oil-producing U.S. Gulf of Mexico compounding worries over refiners' ability to bolster pre-winter fuel supplies, reported Reuters.
The hurricane threat has certainly raised people's fears of refiners struggling to produce enough products, particularly at a time when demand for gasoline is high, said Daniel Hynes, resource analyst at ANZ Institutional Banking.
As oil grows ever more expensive, it seems that only a visible weakening of the [image-nocss] global economy, with tangible evidence that demand for oil products is slowing, would convince market participants to sell, said Morgan Stanley in a research note.
Hedge fund investors are betting peak winter demand will stretch supplies, particularly of heating oil and other high-demand distillate fuels.
Tropical storm Cindy hit the Louisiana coast on Wednesday, forcing the closure of some production in the Gulf of Mexico, home to a quarter of U.S. oil and gas output. The U.S. Minerals Management Service said 3% of daily Gulf oil and gas production had been shut as a precaution as energy companies evacuated some workers from platforms. Tropical storm Dennis was also gathering strength in the Caribbean Sea and was also expected to reach hurricane status later Wednesday, the U.S. National Hurricane Center in Miami said.
Oil market sentiment may turn even more bullish if the preliminary forecast on weekly U.S. crude stocks is proved correct. Stocks are expected to have fallen by 1.2 million barrels, according to a Reuters survey.
The Organization of the Petroleum Exporting Countries (OPEC) last week suspended talk of increasing production by a further 500,000 bpd on top of an increase that came into effect this month. Despite the move back to $60 a barrel, Iran said the group should wait before considering further action.
In this situation, before anything, we should wait for the response of the market after the new increase that we had from the first of July, said Iranian Oil Minister Bijan Zanganeh.
All in OPEC except Saudi Arabia are already pumping at full capacity.
While U.S. demand is running strong, the world's second biggest oil consumer China has been showing signs of weaker-than-expected growth this year, data has shown. Major Chinese refiners, who have been exporting unusually large volumes of gasoline and diesel this year, have cut back operating rates in July as soaring crude costs turn their margins negative for low, state-set domestic retail sales.
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