04-09-05 Oil prices at $ 100 a barrel are no longer an unthinkable prospect in the aftermath of Hurricane Katrina, and Asian demand is part of the reason, analysts said.
Predictions by US investment bank Goldman Sachs in March that oil prices could race upwards to $ 105 a barrel were widely ridiculed, but the damage unleashed by the US storm has made others now consider it a possibility.

Sceptics say oil prices are becoming a bubble just waiting to burst after striking a record high of $ 70.85 a barrel as Katrina hit oil-producing and refining areas in the southern United States, and there appears to be relief in the short term.
World oil prices retreated from $ 70 territory when the US government led a drive by major industrial powers to release emergency supplies of crude. New York's main contract, light sweet crude for delivery in October, fell $ 1.90 to close at $ 67.57 a barrel.

Asian Development Bank president Haruhiko Kuroda said in Singapore that "I don't think $ 70 will be maintained,but how much and when prices start to decline no one knows."
"There's a great uncertainty that exists," he said.

Travel expert John Koldowski, managing director of the Strategic Intelligence Centre at the Pacific Asia Travel Association in Bangkok, said the industry was taking "a long hard look" at what is going on in the oil sector. Analysts had dismissed speculation of $ 100 oil a few months back but "we're really now starting to take it seriously," he said.
"It's a whole new ballgame for us. We're now talking about prolonged levels of relatively high oil prices," Koldowski said.

Some analysts say that with refineries in the US Gulf Coast hammered by Katrina, all that is needed to push prices up to $ 100 is a terrorist attack or labour strike in one of the major oil-producing nations.
"If we have supply disruptions in Saudi Arabia, Iraq or Venezuela or Nigeria, then it could be even worse," said Tony Nunan, manager for energy risk management with Mitsubishi's international petroleum business in Tokyo.
"We could easily have a bigger problem if this sort of thing (labour strike) or terrorist attack occurs in a major oil producing country now... prices will shoot up to three-digit figures," he said.

Saudi Arabia, the world's biggest crude producer which holds the largest proven oil reserves of 261.2 bn barrels or more than a quarter of the global total, has been rocked by a spate of bloody attacks attributed to Al-Qaeda militants in the past two years. Analysts have consistently warned any disruption to Saudi Arabia's production facilities would send shockwaves as it is the only oil-producing country believed to have the spare capacity to raise output.
"The geopolitical situation in oil producing countries like Nigeria and Iraq is certainly less stable than we would like," said Deborah White, a senior energy analyst with French bank Societe Generale in Paris. "It keeps nervousness and prices high," she said.

Oil prices have risen by more than 50 % since the end of 2004 when they were trading at around $ 43 a barrel. The sharp spike in oil prices is attributed mainly to the world's growing thirst for black gold, with the sizzling Chinese economy and strong US consumer demand singled out as the major demand drivers.
A pressing worry now is how much damage has been inflicted on US refineries in the Gulf of Mexico region, which accounts for a quarter of the country's total oil output. More than 88 % of daily Gulf crude production was shut down and nearly 79 % of natural gas output was halted. That was an improvement on the 91 % for crude and 83 for gas.

The Department of Energy said that one refinery in Louisiana was restarting but eight others in the area remained shut down as a result of the hurricane. Combined, the nine refineries' production capacity is 1.83 mm barrels of oil a day -- about 10 % of total US output.
"We have yet to find out how much damage Katrina has caused," said White from Societe Generale in Paris. "At the moment, we are at the mercy of the weather... the worst is that the hurricane season is not over," she said.

The Atlantic hurricane season runs from June to November and the US National Oceanic and Atmospheric Administration had warned that seven to nine more hurricanes could form this year, mainly threatening Caribbean islands and the US southern coast.
"The season is still another three months... we still have a long way to go," said Nunan from Mitsubishi Tokyo. "If we have another hurricane in the same area, it will be a total panic for the oil market."

While the prospect of oil prices touching the three-figure zone cannot be ruled out, analysts doubt a price at that level could be sustained as it would deal a psychological blow to consumers everywhere.
A three-digit crude oil price would be "enough to get everybody, politicians, economists and the average person on the street jumping up and down and cutting back on spending and driving," said Nunan.