Oil prices zip past US$92
New high: A pump attendant checks the metre at a petrol station in Singapore yesterday. Oil topped US$92 in Asian trade on rising geopolitical tensions in the Middle East and new US sanctions on Iran, dealers said. Picture: AFP
Saturday, October 27, 2007
US OIL prices and Brent crude rocketed to all-time highs yesterday on a record-low US dollar, tensions in the Middle East and worries over energy supply shortages ahead of the northern hemisphere's winter.
US crude for December jumped to a record-peak of US$92.22 a barrel, and was at US$91.69 at 0745 GMT (3.45pm Brunei), up US$1.23 from Thursday's close and about 50 per cent from the start of the year.
But US crude is still below the inflation-adjusted high of US$101.70 hit in April 1980, a year after the Iranian revolution.
London Brent crude also hit a fresh all-time high of US$89.30.
Rising global crude oil demand, especially from top consumers the United States and rapidly growing China, has driven oil's current rally, helped by a low US dollar and investment flows from pension and hedge funds into commodities and oil.
Fears of a supply crunch have helped the surge. Producer cartel Opec has signalled it is unlikely to boost supply further and political tensions in the Middle East have increased investors' worries that some output could be disrupted.
Higher prices have so far had a limited impact on economic growth and demand.
Only concerns that a US housing slump may crimp economic growth could weigh on the rally in world oil prices, and signs are emerging of a slowdown in China's demand growth.
In anticipation that the US Federal Reserve may cut interest rates next week, the US dollar hit fresh record lows against the euro and a basket of currencies yesterday. The weak dollar fuels oil buying as investors view dollar assets as relatively cheap
"The market is founded on fear and supply-side concerns," said Gerard Burg, an analyst at National Australia Bank.
"The US moves on Iran and continued worries of supply are the factors now."
The United States slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction, but Russia said such moves only forced Tehran into a corner over its nuclear programme.
Oil, which was falling at the start of the week on concerns about the strength of the US economy, has rallied since US data on Wednesday showed a larger-than-expected 5.3-million barrel drawdown in US crude inventories.
"With all the bullish news flow in the market, I think there is potential for oil to rise further for the rest of the day and in the near term," said David Moore, an analyst at the Commonwealth Bank of Australia.
Exacerbating fears of a possible supply crunch, Opec's Secretary General Abdullah al-Badri said world oil markets were well supplied, while dollar weakness and a flood of speculative investment had helped push prices up to record levels.
Al-Badri added that US$90 a barrel oil was not bringing a windfall to Opec, which is investing in new production and seeing revenues eroded by the weak dollar.
Energy officials from Opec nations Venezuela and Algeria said the producer group would not boost output when it meets informally in Saudi Arabia next month.
"The high prices are not coming from a lack of production," Algerian Energy Minister Chakib Khelil said.
Opec has agreed to boost production by 500,000 barrels per day (bpd) from November 1, but the United States has called on the group to increase output further.Reuters
US crude for December jumped to a record-peak of US$92.22 a barrel, and was at US$91.69 at 0745 GMT (3.45pm Brunei), up US$1.23 from Thursday's close and about 50 per cent from the start of the year.
But US crude is still below the inflation-adjusted high of US$101.70 hit in April 1980, a year after the Iranian revolution.
London Brent crude also hit a fresh all-time high of US$89.30.
Rising global crude oil demand, especially from top consumers the United States and rapidly growing China, has driven oil's current rally, helped by a low US dollar and investment flows from pension and hedge funds into commodities and oil.
Fears of a supply crunch have helped the surge. Producer cartel Opec has signalled it is unlikely to boost supply further and political tensions in the Middle East have increased investors' worries that some output could be disrupted.
Higher prices have so far had a limited impact on economic growth and demand.
Only concerns that a US housing slump may crimp economic growth could weigh on the rally in world oil prices, and signs are emerging of a slowdown in China's demand growth.
In anticipation that the US Federal Reserve may cut interest rates next week, the US dollar hit fresh record lows against the euro and a basket of currencies yesterday. The weak dollar fuels oil buying as investors view dollar assets as relatively cheap
"The market is founded on fear and supply-side concerns," said Gerard Burg, an analyst at National Australia Bank.
"The US moves on Iran and continued worries of supply are the factors now."
The United States slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction, but Russia said such moves only forced Tehran into a corner over its nuclear programme.
Oil, which was falling at the start of the week on concerns about the strength of the US economy, has rallied since US data on Wednesday showed a larger-than-expected 5.3-million barrel drawdown in US crude inventories.
"With all the bullish news flow in the market, I think there is potential for oil to rise further for the rest of the day and in the near term," said David Moore, an analyst at the Commonwealth Bank of Australia.
Exacerbating fears of a possible supply crunch, Opec's Secretary General Abdullah al-Badri said world oil markets were well supplied, while dollar weakness and a flood of speculative investment had helped push prices up to record levels.
Al-Badri added that US$90 a barrel oil was not bringing a windfall to Opec, which is investing in new production and seeing revenues eroded by the weak dollar.
Energy officials from Opec nations Venezuela and Algeria said the producer group would not boost output when it meets informally in Saudi Arabia next month.
"The high prices are not coming from a lack of production," Algerian Energy Minister Chakib Khelil said.
Opec has agreed to boost production by 500,000 barrels per day (bpd) from November 1, but the United States has called on the group to increase output further.Reuters
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