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News :: Economy |
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Crude Oil Hits All-Time High of $56/barrel |
Current rating: 0 |
by Joe Futrelle
Email: futrelle (nospam) shout.net (verified) |
16 Mar 2005
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NYMEX April Light Sweet Crude is currently trading at $56/barrel, a record high. It joins Brent Crude in record territory. |
Oil is up over 30% from a year ago at this time, but in inflation-adjusted terms is still significantly below record prices set in the early 1980's.
Nevertheless, the current spike is causing concern among oil importers such as the U.S., who are pressuring OPEC to increase output. OPEC members are currently meeting to discuss not whether, but rather how much, to increase production, but some members are already producing at capacity.
OPEC is now saying that a $40-50 range is comfortable for them, which bodes ill for industries that depend on cheaper oil.
Meanwhile domestic stocks remain at reasonable levels for the short term, and gas prices are momentarily stable at an average of just over $2/gallon.
(sources: NYT, NYMEX, Gas Price Watch) |
This work is in the public domain |
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Re: Crude Oil Hits All-Time High of $56/barrel |
by Joe Futrelle
futrelle (nospam) shout.net (verified) |
Current rating: 0
16 Mar 2005
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I just read that a decline in domestic oil stocks was part of what caused today's sharp increase.
Here's the relevant AP wire story:
Oil Prices Jump to New High Above $56 Mark
By THE ASSOCIATED PRESS
Filed at 2:49 p.m. ET
Oil prices jumped to a new record above $56 a barrel on Wednesday when traders reacted to shrinking fuel supplies in the United States and brushed off a largely symbolic effort by OPEC to cool the red-hot market.
Crude futures shot up more than $1 a barrel shortly after the U.S. government said domestic supplies of gasoline and heating oil fell sharply last week.
Analysts said the market was also unimpressed with OPEC's decision to authorize the pumping of an extra half-million barrels of oil a day because members of the oil cartel supposedly bound by its production quota are already exceeding the previous ceiling by about 700,000 barrels a day. That means no extra supply will actually be added.
Light, sweet crude for April delivery rose $1.40 to $56.45 a barrel in late afternoon trade on the New York Mercantile Exchange. While floor trading is over on Nymex, a settlement price was not yet posted.
The highest Nymex settlement price for crude futures had been $55.17, set twice in October.
While oil prices are 50 percent higher than a year ago, futures would need to climb above $90 a barrel to approach the inflation-adjusted peak set in 1980.
Gasoline prices are also soaring. The average retail price for regular unleaded is $2.06 per gallon, according to the Energy Department, which predicted last week that prices would rise this spring by at least another 10 cents.
Marshall Steeves, an energy analyst at the New York-based brokerage Refco Group Inc., said the oil market rally does not appear to be losing any steam and that, if economic growth continues at the current pace, prices might soon be testing $60 a barrel.
``I think the market is preoccupied with projections of rising demand growth this year and the possibility that demand growth will rise at a higher pace than supply growth,'' he said.
The International Energy Agency last week raised its forecast for 2005 global oil demand to 84.3 million barrels a day, drawing the picture of a market in which heavy consumption, particularly in the United States and China, will continue to strain supply. That reflects demand growth of about 2 percent.
Other factors pushing oil prices higher include the weak dollar, instability in Iraq, terrorism fears and increased speculation by hedge funds and other well-financed investors.
The speculation is being fueled in part by concerns that the amount of extra output that could immediately be brought onto the market in the event of a supply disruption only amounts to about 1-1.5 million barrels a day, or roughly 1 percent of global demand. This thin supply cushion needs to grow to remove some of the speculative froth from the market, analysts said.
In a largely symbolic effort to help moderate high oil prices, the Organization of Petroleum Exporting Countries on Wednesday agreed to raise its daily output quota by 500,000 barrels to 27.5 million barrels. But OPEC is already producing close to 29.5 million barrels a day, when Iraqi production quota-busting by other nations is factored in. Iraq is not bound by the cartel's quota.
``This 500,000 barrel a day quota increase really doesn't do much,'' Steeves said.
Ed Silliere, a broker at Energy Merchant Intermarket Futures in New York, said the OPEC decision was also largely expected, given the comments made by oil ministers earlier in the week.
Last week's sharp decline in gasoline supplies, however, did spook the market, Silliere said. ``The gasoline number was a complete shock,'' he said.
The Energy Department said the nation's inventory of unleaded gasoline fell by 2.9 million barrels last week to 221.4 million barrels. However, that still leaves the market with 9 percent more gasoline than it had at the same time a year ago.
U.S. supplies of distillate fuel, which include heating oil, diesel and jet fuel, shrank by 1.9 million barrels to 107.3 million barrels, or about 1.5 percent less than a year ago. Crude inventories rose by 2.9 million barrels to 305.2 million barrels, or 8 percent above year ago levels. |
