Crude oil traded above $124 a barrel in New York after reaching a record yesterday on concern supplies of diesel and gasoline may be insufficient to meet rising consumption during the summer driving season.
Refinery maintenance and production cutbacks amid a decline in refining profits have curbed diesel supplies this year. Royal Dutch Shell Plc's Nigerian crude output has been cut by militant attacks and may return within two weeks, a government official said yesterday.
``Diesel is the main driver for the oil rally right now with the U.S., Europe, Asia and Middle East short of cargoes,'' said Tetsu Emori, a fund manager at Astmax Ltd. in Tokyo. ``The Nigerian shutdown isn't helping as that type of crude oil is good to make gasoline and diesel.''
Crude oil for June delivery climbed as much as 84 cents, or 0.7 percent, to $124.53 a barrel, and traded at $124.32 a barrel at 10:11 a.m. in Singapore in after-hours trading on the New York Mercantile Exchange. Oil futures reached a record $124.61 yesterday and settled at $123.69 a barrel, the highest close since trading began in 1983. Prices are double the level of a year ago.
A May 7 government report showed that U.S. distillate fuel inventories and refinery operations fell last week. Barclays Capital yesterday raised its forecast for U.S. crude oil prices, citing stronger demand from China and the Middle East.
U.S. distillate stockpiles declined 107,000 barrels to 105.7 million, the Energy Department reported.
``When refiners in Europe and the U.S. cut output on poor refining margins for gasoline, that affected the supply of diesel as well,'' Astmax's Emori said.
Heating Oil
``There's huge diesel demand growth in Asia, which is going to keep pressure on supplies,'' said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. ``Whenever there's a big rise in one energy market there's an impact on the psychology of the other markets. Also, demand for crude oil will rise as refiners boost distillate output.''
Heating oil for June delivery traded at $3.5170 a gallon at 9:52 a.m. in Singapore after climbing 6.25 cents, or 1.8 percent, to $3.5098 a gallon in New York yesterday, the highest close since trading began in 1978. The contract reached $3.5310, a record intraday price.
Some traders use heating-oil futures to hedge their diesel and jet-fuel purchases.
Gasoline futures for June delivery rose 1.96 cents, or 0.6 percent, to close at a record $3.1378 a gallon in New York yesterday. The contract traded at $3.1493 a gallon at 9:52 a.m. Singapore time.
Brent crude oil for June settlement was at $123.50 a barrel, up 66 cents, on London's ICE Futures Europe exchange at 10:13 a.m. Singapore time.
source: 8may2008
CALGARY - Oil could shoot to $200 a barrel within the next two years as part of a "super spike," investment bank Goldman Sachs said Tuesday, as crude cruised to a record price of more than $122 per barrel.
It's an oil forecast number that's gaining in popularity — and a prospect analysts and economists say would lead to a global slowdown, a deep U.S. recession and higher prices to consumers in Canada for everything from gasoline to food.
"We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent," U.S.-based Goldman analyst Arjun Murti said in a research note.
"The possibility of $150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the up-cycle remains a major uncertainty."
This isn't the first prediction that already-skyrocketing oil prices will only keep rising.
About a month ago, Chakib Khelil, president of the Organization of Petroleum Exporting Countries, warned oil could reach $200, blaming the rise on geo-political tensions and market speculators.
Two weeks ago, Jeff Rubin, chief economist at CIBC World Markets, predicted oil prices will average $150 in 2010 and $225 in 2012.
On Monday, Matthew Simmons, chairman of investment bank Simmons & Co. International, said at a conference oil prices "will go through $200 a barrel like a hot knife through butter."
Doug Porter, deputy chief economist for BMO Capital Markets, said Tuesday $200 oil would probably cause a global economic slowdown that would push the weak United States economy into a deep recession and sideswipe Canada as well.
"Up to this point, the global economy has held up remarkably well in the face of oil prices going from $20 to over $120, but I think that added increase (to $200) over such a short period of time would prove to be a tipping point for global growth, especially in North America."
Consumers would see higher energy prices and higher inflation, Porter said, but some prices would fall simply because energy costs would deplete family budgets to the point that there would be less demand for discretionary items such as clothing, electronics and appliances.
Porter said $200 oil within two years is "possible" but not likely.
Jim Burkhard, global oil group managing director for Boston-based Cambridge Energy Research Associates, said it's conceivable prices could hit $150 within a year, which would hurt consumers in the U.S., Canada and Europe.
"In the Middle East and China, where prices are subsidized, the governments there could decide to maintain those subsidies, but it would be increasingly difficult."
Frank Kelton, head of energy sales for brokerage MF Global Canada Co. in Calgary, said $200 oil would be "devastating" to the economy but added he thinks oil will fall back after reaching about $125.
"Fundamentally, this thing has to come off," he said.
Crude oil rose to a record $122.73 a barrel in New York Tuesday on threats to supply in Nigeria and Iraq and growing Asian fuel consumption.
It closed at $121.84, up $1.87 from Monday.
So far this year, oil has averaged $102.43 per barrel.
Royal Dutch Shell PLC said a militant attack over the weekend damaged a pump station in Nigeria, where violence has cut exports from Africa's biggest oil producer.
Goldman, which was one of the first to point to a triple-digit oil price more than two years ago, said it believed the market was approaching the crunch in the super spike.
The super-spike theory argues that a lack of adequate supply growth along with price-insulated demand growth in less developed countries will lead to a dramatic and continuous rise in oil prices that will ultimately lead to a sharp correction in oil demand.
source: 8may2008
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