Record High Oil Prices Rocket
Close to $110 a Barrel
Agence France-Presse 11mar2008
NEW YORK — World oil prices continued their record charge Tuesday, rocketing close to 110 dollars amid lingering supply concerns and as the US dollar plumbed fresh lows against the euro.
Traders say oil prices have also been propped up because "black gold" is priced in dollars and buyers and speculators armed with stronger currencies than the US dollar are buying up oil contracts.
New York's main oil futures contract, light sweet crude for delivery in April, finished up 85 cents at a record closing high of 108.75 dollars per barrel after hitting an all-time intra day high in earlier trading of 109.72 dollars.
In London, Brent North Sea crude for April delivery settled up 1.09 dollars at 105.25 dollars after earlier jumping to a record intraday high of 105.82 dollars.
"Oil rewrites the record books as the once mighty dollar sinks further into obscurity," Phil Flynn, a market analyst at Alaron Trading, said in a briefing note.
The European single currency jumped to a record high of 1.5495 dollars earlier Tuesday before retreating to around 1.5346 dollars.
"The powerful upsurge in oil prices shows little signs of abating," wrote Barclays Capital analysts.
"With prices now in sight of the 110-dollar mark, the debate on how much higher oil prices can go has intensified considerably."
Some analysts said oil prices could ease in coming months amid concerns about slowing US economic growth.
Other analysts believe that surging energy demand from China and India would soak up US demand if it declines, however.
Prices have blazed a record-breaking trail in record weeks, smashing through 107 and 108 dollars in New York on Monday.
"Currently, concerns over a weakening US economy are leading investors to find a haven in commodities as the dollar weakens on expectations of further cuts in US interest rates," energy consultancy John Hall Associates said.
"This is outweighing the impact of fundamentals" of supply and demand, they added.
The Paris-based International Energy Agency warned that high prices would likely be a reality for some time to come.
"We are in an era of higher oil prices," the IEA said in a monthly market report.
The IEA trimmed its monthly estimate for world oil demand this year to 87.5 million barrels per day, "with downward pressures from weaker economic growth in the OECD mostly offset by stronger former Soviet Union (FSU) projections."
Oil demand was forecast to increase by 1.7 million barrels per day in 2008 or 2.0 percent compared with 2007, when it grew by 1.1 percent.
The Organization of the Petroleum Exporting Countries (OPEC) decided at a policy meeting last week to keep its daily output target of 29.67 million barrels despite calls by US President George W. Bush for it to review boosting output.
OPEC, which produces 40 percent of the world's crude, blamed the high cost of crude on speculative buying as investors seek hedges against a weakening dollar and rising inflationary pressures.
Oil Price Sets Another Record
NEW YORK — Crude oil futures shot to another record high Tuesday, as new buyers looked beyond mixed projections on petroleum demand to participate in the upward momentum of the past few weeks.
Light, sweet crude for April delivery settled 85 cents, or 0.8 percent, higher at $108.75 a barrel on the New York Mercantile Exchange, after earlier jumping to a record intraday high of $109.72.
In London, Brent crude on the ICE futures exchange settled up $1.09 at $105.25 a barrel.
Nymex futures traded in a range of more than $3 throughout the session, as the factors that have in the past fueled crude's ascent this year were inconclusive Tuesday.
The dollar's weakness has fueled much of oil's recent run-up, as investment funds seek a hedge in hard assets. But on Tuesday the dollar strengthened after the Federal Reserve announced measures to add liquidity to financial markets in an attempt to soften the credit crunch.
The International Energy Agency on Tuesday slightly cut its projections for world oil demand this year, which it saw at 87.5 million barrels a day, up 2 percent from 2007. The energy watchdog agency for the world's most industrialized nations said high crude prices continued to chip away at oil consumption in the United States and other industrialized nations, but it warned that there was unlikely to be much relief from current prices because of strong demand in China and other emerging markets.
Separately, the Energy Information Administration said Tuesday it expected a slowing economy and record high oil prices to hold U.S. oil demand growth to just 40,000 barrels a day in 2008, bringing daily consumption to 20.74 million barrels.
Data due out Wednesday is expected to show U.S. petroleum stockpiles grew last week, according to a survey of analysts. The report is expected to show that U.S. crude oil stockpiles grew by 1.6 million barrels, gasoline stockpiles grew by 300,000 barrels and stocks of distillates, which include diesel fuel and heating oil, fell by two million barrels.
Investors said the market seemed driven by players seeking to capitalize on the momentum that has carried oil futures up more than $20 in the last month.
"It seems to be sort of a piling on in crude oil," said Chris Mennis, president of the brokerage New Wave Energy in Aptos, California. "People seem to be closing their eyes and buying it. We're all tired of hearing about how the funds are buying it, but that seems to be what's going on."
Tim Evans, an energy analyst at Citigroup in New York, noted that buying sentiment has managed to hold up in spite of a stronger dollar.
"It just looks like an ongoing flow of investment into the market, creating more inflation, and then worrying about that inflation and buying even more crude," Evans said.
Oil Rises to Record for Fifth Day in
New York on Weak Dollar
MARK SHENK / Bloomberg News 11mar2008
Crude oil rose to a record for a fifth day, climbing above $109 a barrel in New York, after the weak dollar prompted traders to invest in commodities.
The euro rose to $1.5495 against the dollar, the highest since the single currency's introduction in 1999, after European Central Bank council member Axel Weber said he doesn't see any leeway to lower borrowing costs. The dollar rebounded from the day's low after the Federal Reserve said it will lend up to $200 billion of Treasury securities in exchange for debt.
"This is all about the dollar," said Adam Sieminski, Deutsche Bank's chief energy economist in New York. "To a lot of the world the rise in prices isn't that severe because of the falling dollar. Also OPEC has no incentive to rein in prices with the dollar dropping."
Crude oil for April delivery rose 85 cents, or 0.8 percent, to settle at $108.75 a barrel at 2:46 p.m. on the New York Mercantile Exchange, a record close. Futures surged to $109.72 a barrel today, the highest since trading began in 1983.
Brent crude for April settlement rose $1.09, or 1.1 percent, to close at a record $105.25 a barrel on London's ICE Futures Europe exchange. Futures reached a all-time high intraday price of $105.82 a barrel today.
"The decline of the dollar has a lot to do with the rise in prices," said Frank Verrastro, director of the Center for Strategic and International Studies energy program in Washington. "People are looking at the oil market as a safe place to park their money in this time of economic uncertainty. The end users of oil are not major participants in this market."
Today's steps by the Federal Reserve are the latest in Chairman Ben S. Bernanke's effort to alleviate increasing strains in financial markets that are curtailing credit available to homeowners and companies.
"Oil prices have come off on the central bank action to add liquidity, which has strengthened the dollar," said Tom Bentz, a broker at BNP Paribas in New York. "The trend is still up and it will take a lot more to break the back of this rally."
The U.S. Dollar Index, a weighted gauge against the euro, yen, pound and three other currencies, fell to the lowest since the basket started trading in 1973 on March 7. The index touched 72.474 today, just short of the record low of 72.462.
"We started the year with the dollar index at 76 and the drop to 72 has been good for a $15 gain in oil," Sieminski said, "When the index hits 70 the price of oil will hit $120."
Ministers from the 13-nation Organization of Petroleum Exporting Countries have said the drop in the dollar against currencies such as the euro and yen justifies higher oil prices.
In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil benchmark, is up 81 percent from a year ago. Oil is up 55 percent in euros, 74 percent in British pounds and 58 percent in yen.
The International Energy Agency, an adviser to 27 developed nations, cut its forecast for 2008 global oil demand for a second month as record prices curbed consumption in some parts of the world. The agency reduced its forecast by 80,000 barrels a day to 87.54 million barrels a day, leaving annual demand growth at 2 percent, the IEA said today in a monthly report.
"It's a bubble and eventually it will burst," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "The fundamentals aren't supportive of these prices. Today's IEA report sure looks bearish to me."
OPEC left production targets unchanged on March 5 when officials met in Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day. The group pumped 32.1 million barrels a day in February, down by 120,000 barrels a day from revised January levels, according to the IEA.
White House Comment
White House spokeswoman, Dana Perino, said the administration of President George W. Bush is "very concerned" about high crude oil prices. "We know it's impacting America's consumers and small businesses especially," she told reporters traveling with the president to Nashville aboard Air Force One.
"It would be wrong of the president to provide false hope to people who think that we are going to be able to have an immediate impact to reduce gas prices," Perino said. "This is something that we're all going to have to work through."
Gasoline for April delivery rose 1.12 cents, or 0.4 percent, to a record close of $2.7261 a gallon in New York. Futures touched $2.7435 earlier today, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.
Pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 0.5 cent to $3.227 a gallon yesterday, AAA, the nation's largest motorist organization, said. That matches the record reached on May 24.