Crude Oil Prices Surge to New Highs
By THE ASSOCIATED PRESS
Filed at 8:54 a.m. ET
LONDON (AP) -- The price of crude oil futures surged to new highs Monday despite assurances from Middle East oil producers that they were committed to bringing the price down as a strike began in Africa's largest exporter.
Traders said the market was concerned about short supply because of the strike in Nigeria, the slow recovery of production in the Gulf of Mexico following hurricanes and concern over U.S. fuel stocks as the northern hemisphere winter approaches.
Crude for November delivery rose to $53.54 a barrel in electronic trading on Monday morning, up 23 cents from its record settlement price of $53.31 set Friday on the New York Mercantile Exchange.
While oil prices are about 79 percent higher than a year ago, they are $27 below the peak inflation-adjusted price reached in 1981. Supply is also tight, with capacity only about 1 percent above the daily supply of 82 million barrels.
On Sunday, U.S. Treasury Secretary John Snow said he had received assurances from Arab oil-producing nations that they would attempt to lower crude prices by increasing supply as the Northern Hemisphere winter approaches.
The Organization of Petroleum Exporting Countries, which includes the world's largest producer Saudi Arabia and other key Middle East exporters, has already raised its daily production quotas by 2.5 million barrels a day this year to just under 30 million barrels.
But traders remain wary, because previous OPEC efforts to boost output have involved crude with a high-sulfur content, which is less desirable for refiners.
``This year's demand spike, driven by exceptional growth out of China and India, has pushed world oil production to bump up capacity,'' said Energyasia.com in its latest research report.
``For most of the last decade, the world has had a spare capacity buffer of around 3 to 5 million barrels per day, but no more,'' it said.
On London's International Petroleum Exchange, Brent crude futures for October delivery also reached a new all-time intraday high, rising to $50.22 a barrel.
Prices are now more than 80 percent above levels at the beginning of 2004 -- the front month contract on the opening day of trade in January reached a high of just $26.99.
Brokers described the $50 a barrel mark as an important psychological milestone and said ongoing supply fears indicated further increases are likely.
``Current market dynamics are pointing to higher prices from a fundamental perspective and there is plenty of scope for tactical fund buying to assist this process,'' said Kevin Norrish, oil strategist at Barclays Capital in London.
Former Malaysian leader Mahathir Mohamad, now an adviser to his country's national oil company Petronas, said Monday the world did not heed warnings after earlier global shocks, like the one in 1981.
``The price will come down but it will never be back to the same levels again,'' said Mahathir, who stepped down in October last year after 22 years in power.
Mahathir took a potshot at U.S. consumption, saying that ``instead of driving big cars, they now drive big vans'' and they have ``never learned from these episodes.''
Malaysia is Southeast Asia's second largest oil producer after Indonesia.
The market is also closely monitoring the slow recovery of production in the Gulf of Mexico where around 475,000 barrels a day remain frozen because of damage caused by Hurricane Ivan last month.
Of the 4,000 structures and 33,000 miles of pipeline in the Gulf of Mexico, around 150 platforms and 10,000 miles of pipelines were in Ivan's path, the U.S. federal Mineral Management Service said on its Web site. It didn't give further details.
The market is also nervously watching events in Nigeria, where an oil workers' strike began Monday.
``The strike is on. Nigerians are united over this,'' Nigeria Labor Congress spokesman Owei Lakemfa. The Nigeria Labor Congress is the nation's main labor union.
The strike takes place amid threats by a popular rebel leader's pledge to take back the rich Niger Delta oil fields if peace talks with the government fail. Nigeria pumps out about 2.5 million barrels per day and is Africa's largest producer and the fifth-largest source of U.S. imports. |
