Oil Jumps After Fire at Occidental Field Triggers Force Majeure...

Oil Jumps After Fire at Occidental Field Triggers Force Majeure

By Matthew Leising

Feb. 8 (Bloomberg) -- Crude oil jumped close to $60 a barrel in New York after Occidental Petroleum Corp. said it would be unable to meet commitments to its customers after a fire led to the shutdown of most production from its Elk Hills field in California.

There is no timeframe for resuming production at the field, which normally has output of 120,000 barrels of oil equivalent a day, said Occidental spokeswoman Susie Geiger. About 95 percent of output is shut in. Occidental spokeswoman Jan Sieving confirmed in an interview that the company declared force majeure.

``A force majeure at the Elk Hills field in California'' caused prices to spike, said Andy Lebow, a trader with Man Financial in New York.

Crude oil for March delivery rose $2, or 3.5 percent, to $59.71 a barrel on the New York Mercantile Exchange, the highest closing price since Dec. 29. Futures touched $59.87 a barrel. Oil had earlier traded as low as $57.30.

Occidental, the fourth-largest U.S. oil company by market value, today may begin investigating a natural-gas pipeline leak that caused the fire that led to the shutdown at Elk Hills, California's biggest gas field. Sixty percent of the field's output is crude oil.

The fire, which began about 2:30 p.m. local time on Feb. 6 and injured four contract workers, ``was out during the whole night,'' Geiger said in an interview today. Assessment of damage may begin ``hopefully later today.''

In London, Brent crude oil for March settlement closed up $1.80, or 3.2 percent, to $59.03 a barrel. It was the highest close since Jan. 2.

Heating Demand

Extended lower-than-average temperatures across most of the U.S. boosted demand for heating fuels, helping prices to rise earlier in the day. The temperature in New York City at 7 a.m. today was 15 degrees Fahrenheit (minus 9 Celsius), or 12 degrees below normal, according to Meteorlogix LLC.

The next few days will see high temperatures in the lower 30s in New York City, compared with a normal high of 39 degrees, said Jason Nicholls, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania.

The below-normal temperatures ``might even continue through the beginning of March,'' Nicholls said.

U.S. supplies of distillate fuel, including heating oil and diesel, are 7.9 percent above the five-year average, even after declining a second week, the Energy Department said yesterday. Crude oil stocks are 9.8 percent above their five-year average at 324.5 million barrels for the week ending Feb. 2, the department said.

Gasoline Stockpiles

Gasoline stocks rose 2.6 million barrels to 227.2 million last week, the highest since February 1999, and 4.5 percent more than the average. Stockpiles were expected to increase by 1.63 million barrels, according to the median estimate from a Bloomberg News survey of 14 analysts.

Inventories of distillates dropped 3.63 million barrels, more than the 3 million barrels expected in the survey, to 136.3 million barrels.

Heating oil rose 5.89 cents, or 3.5 percent, to $1.725 a gallon on the Nymex.

Oil at $60 a barrel ``has proven to be a very emotional level,'' said William Adams, chief energy trader at LaSalle Futures Group Inc. in Chicago. ``The fact that it can't break $60 gives the impression the market's losing upward momentum.''

Crude oil rose as high as $59.95 a barrel on Feb. 5 and $59.99 on Feb. 6.

Rebounding Prices

Oil touched a 20-month low of $49.90 in New York on Jan. 18 after mild weather in the U.S. Northeast cut heating demand, swelling stockpiles and freeing refiners to make gasoline. Prices have gained 20 percent since, as temperatures dropped in the Northeast and gasoline demand remained above year-earlier levels.

New York oil futures may rise as high as $71.50 a barrel this year and average 4 percent higher than in 2006 because producer investment is ``significantly'' short of requirements, according to Goldman Sachs Group Inc.

The price of the benchmark U.S. crude, called West Texas Intermediate, may average $69 this year, an increase from $66.25 in 2006, Goldman economist James Gutman said at a conference in Hong Kong today.

``If OPEC would really implement the cuts they decided, that would be enough to bring the price to $60,'' said Eugen Weinberg, a senior commodities analyst at DZ Bank AG in Frankfurt.

Members of the Organization of Petroleum Exporting Countries had trimmed 800,000 barrels a day by the end of January, according to a Bloomberg News survey. OPEC, which pumps about 40 percent of the world's oil, agreed to cut 1.2 million barrels a day starting in November, and a further 500,000 barrels starting this month.

Adams said traders were skeptical of further OPEC cuts.

``We haven't experienced OPEC truly tightening the valves,'' he said.

To contact the reporters on this story: Matthew Leising in New York at