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Financial Times: Possible return of BP oilfield puts crude at five-month low

By Kevin Morrison and Darryl Thomson
Published: September 9 2006 03:00 | Last updated: September 9 2006 03:00

Oil fell to a five-month low yesterday as BP said it might be able to return its Alaskan oilfield, Prudhoe Bay, to full production sooner than expected.

The return of the field was one of a series of factors that weighed on oil prices this week. Royal Dutch Shell said its Mars platform in the Gulf of Mexico was at 190,000 barrels of oil equivalent a day, up 20 per cent from its pre-Hurricane Katrina levels last year. The Mars platform was badly damaged by the hurricane, and did not resume production until May.

The absence of hurricanes so far this year in the Gulf of Mexico also helped drag prices lower. ICE Brent crude futures were down58 cents at $65.95 a barrel in late London trade, above a five-month low of $65.78 touched earlier in the day.

The benchmark Brent contract dropped more than 4.5 per cent over the week, and has fallen more than 16 per cent from a record high of $78.65 touched a month ago.

The US benchmark crude price fell by a similar amount. October West Texas Intermediate was off 51 cents at $66.81 a barrel in late morning trade on the New York Mercantile Exchange, but off a five-month low of $66.65. The contract fell more than 3 per cent this week.

BP said its Prudhoe Bay oilfield, which has been partially shut due to pipeline rust since August, could return to its full 400,000b/d capacity by the end of October, if regulators approve a plan to bypass the corroded pipeline. This would allow a reopening several months ahead of estimates.

The decline in oil prices came in a week when the US driving season ended, a period that marks the peak in petrol demand in the world’s largest oil consuming market.

US gasoline futures fell almost 6 per cent this week to $1.6300 a gallon on Nymex, near its lowest level since mid-March. Another drag on oil prices has been the increase in US petroleum product inventories to comfortable levels.

Gold fell to a six-week low of $606.20 a troy ounce yesterday as a stronger dollar and weaker oil prices affected prices. The bullion price partially recovered by the London close to $609.00/$610.00, marking a 2.4 per cent drop over the week.

Silver enjoyed a boom earlier in the week, rising to a three-month high of $13.22, but ended the week at $12.12/$12.19 a troy ounce.

In contrast, base metal prices were firmer. Copper prices rose more than 3 per cent over the week, despite falling yesterday, on an expected pick-up in demand in Europe and the US where factories are returning to full production after summer breaks. The three-month copper price fell $85 to $7,830 a tonne on the London Metal Exchange yesterday.

Aluminium was in the rare position of being the star performer among base metals this week, rising almost 6 per cent on hopes of an acceleration in demand growth. The three-month LME aluminium contract fell $30 to $2,640 a tonne yesterday. The aluminium price has lagged behind the rise in copper, nickel and zinc this year.

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