Fresh supply worries push oil prices upwards

Brian O’Mahony, Chief Business Correspondent

After losing almost $5 this week, prices rose again yesterday when Ecuador suspended crude exports, confirming fears that demand/supply issues are the real concern.

Meanwhile a report from Goldman Sachs warned that the price of oil per barrel will be $68 per barrel in 2005 a radical revision from an earlier figure of $55pb.

New York's light sweet crude due for delivery in September, gained 76 cents to $64.03 a barrel in electronic trade. In London, the price of Brent North Sea crude oil for delivery in October gained 90 cents to $63.30 a barrel.

Sceptics continue to warn that the problem for oil and gas in the years ahead is driven by demand and the ability of the world oil suppliers to meet it.

Supply concerns have heightened, not for the first time, after US refineries were unable to deliver on time. That problem pushed New York futures to historic highs of $67.10 last weekend and to $66.85 in London on Monday.

This weekend, Ecuador provided the latest oil price spur as violent protests in two oil-rich Amazon provinces turned ugly.

Striking workers and the local population have commandeered over three dozen oil wells to force negotiations for a bigger share of oil revenues. That sent shock waves through the market, analysts said.

Ecuador is South America's fifth-largest oil producer and more than half of its exports go to the US. The country normally produces 200,000 barrels of oil a day.

Ecuador's President Alfredo Palacio said that state-run oil group Petroecuador's facilities 35 of which have been occupied by protesters had dropped from 210,000 to 30,000 barrels a day, costing the country $30m a day in lost revenues.

Oil traders were also absorbing the report from Goldman Sachs in which the US finance house revised upward its forecasts for oil prices, citing a lack of investment in the sector. The bank raised its forecasts for New York crude in 2005 from $53.50 a barrel to $67 while predicting a $68 average in 2006.