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Oil breaks 80 dollars on supply, storm fears
By Antoine Agasse
AFP
NEW YORK
Petroleumworld.com 09 13 07Crude oil prices burst into record territory Wednesday as New York futures topped 80 dollars a barrel, with traders fretting over a big drop in US reserves and a new tropical storm in the Gulf of Mexico.
The contract for light, sweet crude for October delivery closed at 79.91 dollars, a jump of 1.68 dollars, after peaking at 80.18 dollars. That smashed the record of 78.77 dollars on August 1.
In London, the price of Brent North Sea crude for October delivery settled up 1.30 dollars to 77.68 dollars per barrel after rising as high as 77.93 dollars, approaching the all-time high of 78.60 dollars on that exchange.
Prices shot higher after news that US crude reserves fell by a sharper-than-expected 7.1 million barrels over the past week.
"The seven-million barrels drop in crude oil stocks was the primary surprise" of the Department of Energy report, Citigroup analyst Tim Evans said.
Also pushing prices higher was news of the formation of Tropical Storm Humberto, which could affect oil installations in the Gulf of Mexico.
John Kilduff, analyst at MF Global, said the rally was fueled by strong momentum as well as supply factors.
"There are obviously supply fears," he said.
"We're getting increasingly into a drier situation in respect with the amount of gasoline in storage. There is zero room for error."
Kilduff said he believes prices will move above 80 dollars a barrel and hold there "for a period of time," but that "I think we will see lower prices in the fourth quarter."
The fresh New York high also came as the International Energy Agency lowered its predictions of global oil demand for this year and 2008 because of ongoing turbulence across financial markets.
The IEA, which acts as energy policy advisor to industrialized countries, reduced its demand forecast to 85.9 million barrels per day in 2007 and 88 million bpd in 2008 from its prediction last month of 86 and 88.2 million bpd respectively.
"Looking ahead, continued high prices may further dent demand," it said in its latest monthly report.
In recent months, oil prices have been driven higher by unrest in crude-producing nations -- notably Iran and Nigeria -- as well as a lack of global refining capacity and fear of hurricane damage to Atlantic oil installations.
On Tuesday, the Organization of Petroleum Exporting Countries said it would pump an extra 500,000 barrels of oil per day from the start of November.
But most traders viewed that as a symbolic move that would do little to help ease the supply crunch.
Analyst David Kirsch from Washington-based consultancy PFC Energy said the OPEC decision "will take some of the near-term supply concerns off, but shouldn't put too much downward pressure on markets."
Saudi Arabia appeared to have forced through the increase in the face of stiff opposition from the majority of its OPEC partners.
OPEC produces about a third of global oil supplies.
AFP 12 1937 GMT 09 07
Copyright© 2007 AFP. All rights reserved.
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