Updated from 2:55 p.m.
Oil prices raced to record highs Wednesday on fears that two tropical storms in the Gulf of Mexico will disrupt supplies and cut refinery output.
August crude closed up $1.69 to $61.28 a barrel on Nymex, the highest-ever close for a front-month contract. Gasoline futures soared 11 cents, or 6.5%, to a record high of $1.79 a gallon.
Roughly 3% of the Gulf's oil and gas production is currently shuttered after the arrival of Tropical Storm Cindy on the Louisiana coast overnight, officials say. The storm, which packed sustained winds of about 75 mph, is currently weakening and heading toward Mississippi.
Traders are also eyeing Tropical Strom Dennis, which is forming in the Caribbean Sea and stands a better chance of becoming a hurricane, forecasters say. Last year, Hurricane Ivan cut oil supply to the U.S. by 43 million barrels, driving refiners to borrow crude from standing inventories.
"The storms raised the consciousness that the Gulf Coast system can't tolerate summer interruptions," said Tom Kloza, chief oil analyst at OPIS. "Nobody will sell into this market or go short."
Kloza says that some minor refineries' power outages caused by the storm probably cut production marginally; it was enough, however, to trigger "a runaway market." He estimates that product prices, which are at records, could go higher.
The Gulf of Mexico is home to about 25% of U.S. oil and gas production, and to 38% of U.S. refineries.
The Louisiana Offshore Oil Port, the largest harbor for imported oil in the U.S., has been closed since yesterday but continues to make oil deliveries to customers, according to its spokeswoman, Barb Hestermann. "We continue to make deliveries but we aren't offloading any ships. Once the weather calms down, we will let ships moor again," she said.
Heating oil prices rallied Tuesday on concerns that a supply disruption to refineries could reduce winter supplies ahead of the peak demand season for distillates. Heating oil was recently up 6 cents at a record $1.79 a gallon, more than 60% higher than the same time a year ago.
With oil persistently high, analysts keep ratcheting up their estimates and price targets for the energy industry. In a research report Wednesday, Credit Swiss First Boston analyst Mark Flannery raised the integrated oil and gas sector to overweight from neutral, and increased full-year earnings estimates for a host of energy companies.
Flannery raised his price target on
to $127 from $115 and his 2005 earnings estimate to $12.18 a share, from $9.85. He upped the price target on
to $66 from $62, and raised the 2005 earnings estimate to $6.57 a share, from $5.53.
"Integrated oils should once again post a year of 10%-plus earnings growth, and this is attractive in the current equity market," Flannery said.
Among refiners, Flannery likes
, raising his price target to $55 from $50 and increasing his 2005 earnings estimate to $5.07 a share, from $4.67, based on a boosted refining margins outlook.
Elsewhere, shares the Canadian oil and gas company
fell 6% after it reported a fourth drilling attempt in Papua New Guinea. Three previous weren't successful in reaching the target depth. Wilf Gobert, integrated oil analyst at the Canadian firm Peters & Co., said the company has encountered oil in its preliminary drilling attempts but it has yet to discover commercial quantities.
"The company restated its drilling depth twice already since it started this well, which isn't a good sign," Gobert said. Raymond James, one of the few brokerage firms covering InterOil, said in a note that although the preliminary results continue to be positive, "we are still waiting on definitive proof of a commercial hydrocarbon discovery."
Despite a continued surge in oil prices, shares of energy companies were mostly trading down Wednesday. Both the Philadelphia Oil Service Index and the Amex Oil Index dropped more than 1%.
Among the major producers shares were mostly down.
fell 1.5%, Chevron dropped 2%,
lost 0.6%, and