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Oil closes in on $100 a barrel
Crude oil prices on Wednesday rose to striking distance of $100 a barrel level, boosted by the tumbling US dollar and fears of another drop in inventories, while gold prices rose above $800 an ounce. Nymex January West Texas Intermediate crude oil hit an all-time record of $99.29 a barrel in Asian trading, extending from its Tuesday surge of $3.39 to a closing price of $98.03 a barrel – the highest since the contract started to trade in 1983. West Texas Intermediate crude oil was later trading $1.04 higher at $99.07 a barrel. Brent crude oil jumped $1.04 to $96.53 a barrel. The dollar fell Tuesday to a record low against the euro of $1.4853 and kept close to that level on Wednesday after the Federal Reserve cut its forecast of the potential growth of the US economy to 2.5 per cent. The price surge was helped by news that Shell has halted 155,000 barrels a day of production at one oil sands unit in Scotford, Canada, and comments that China will increase the supply of fuel to ease shortages. The oil market is waiting to see whether Opec, the cartel which controls 40 per cent of the world’s oil production, will agree to raise output at its next ministerial meeting in Abu Dhabi on December 5. Opec did not discuss its production policy at its head of states summit in Riyadh last week. Spot gold prices surged to $804.20 an ounce on the combination of a weakening dollar and fears of an oil-led inflation spike. Spot gold prices are forecast to rise to $843.70 an ounce by September 2008, according to a poll on Tuesday by delegates at the London Bullion Market Association annual precious metals conference in Mumbai, India, the most important event for the gold market. Most participants said that gold prices were likely to surge next year during a brief period above the all-time high of $850 an ounce reached in January 1980. The majority of participants pointed to the weakness of the US dollar as the main driver for gold prices as the currency has fallen 16 per cent this year against a basket of major currencies. Other cited fears about inflation and geopolitical risk. Harry Tchilinguirian, senior energy analyst at BNP Paribas in London, is forecasting that oil will reach $100 in the peak winter season followed by a correction next year. Mr Tchilinguirian says the market will remain tight as virtually all of the global oil market’s effective spare capacity (estimated at 3m barrels a day) could be used by refineries as they complete maintenance programmes and step up production for winter demand. Although concerns about the outlook for the US economy are increasing, Mr Tchilinguirian says emerging market demand for oil will remain strong, underpinned by strong GDP growth, infrastructure spending and subsidies for retail petrol prices, which shield consumers from the full impact of increased market prices. UBS has raised its average 2008 WTI forecast from $65 to $74 and sees prices rising to $82 by 2012. “Global oil supplies are increasingly constrained,” said Jan Stuart of UBS. “In the next five years, non-Opec production will begin to decline and global spare capacity will decline to half its current size.” However, UBS also says oil prices near $100 a barrel are unsustainable and expects a near-term correction. Traders’ attention on Wednesday will turn to the latest weekly US inventories report, which is expected to show a fall of 1.2m barrels in crude stocks, according to a preliminary poll of analysts by Reuters. US households could see their bills for heating oil double this winter, according to government forecasts. Article from the FT.com No one has commented on this article. |
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