Oil prices briefly top $58 a barrel Bweek
APR. 4 12:12 P.M. ET Oil prices briefly topped $58 a barrel Monday, rallying on longstanding fears about potential supply disruptions and growing demand even as actual inventories of crude are on the rise.
"I've been doing this for 22 years and I've never seen anything like this," said oil analyst Ken Miller at Purvin & Gertz in Houston. "I view this as a very unstable situation."
The head of the Organization of Petroleum Exporting Countries said a half-million-barrel-a-day increase to its output quota may be necessary to ease market tensions, though he reiterated the cartel's claim that the market is adequately supplied.
After touching a high of $58.28 in electronic trade, light, sweet crude for May delivery was up 33 cents to $57.60 a barrel in midday trade on the New York Mercantile Exchange. That topped the intraday high of $57.70 a barrel reached Friday, when the contract settled at a record $57.27.
Heating oil prices rose more less than a cent to $1.67 a gallon, while unleaded gasoline fell less than a cent to $1.727 a gallon.
Brent crude rose 69 cents to $57.20 a barrel on the International Petroleum Exchange.
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is Kuwait's energy minister, said Monday that consultations started two days ago and ministers believe "we have to wait to see exactly how" prices behave in the next two weeks.
Any production increase would occur in May, Al Sabah said before a Parliamentary session.
"Until now, there is no shortage in the market" and there is enough supply, he said. "I think if prices continue to increase, we should increase the 500,000 (barrels a day)."
OPEC already is exceeding its current production ceiling of 27.5 million barrels a day by about a half million barrels a day, according to Al Sabah.
The group's oil ministers were "also waiting for the U.S. gasoline inventory," he added.
Last week the U.S. government said the nation had 214.4 million barrels of gasoline, or 6 percent above year ago levels. The supply of crude oil -- after growing for five weeks straight and by more than 17 million barrels -- was 314.7 million barrels, or 9 percent above year ago levels.
"There's no shortage of crude and no shortage of products," said Miller of Purvin & Gertz, adding that "oil prices are $10-$15 above where they should be."
Miller conceded that global refining capacity is tight and that OPEC was caught off guard by the surge in global demand to about 84 million barrels a day. But he said the industry is responding.
Nymex futures are up $15 since the start of the year and 67 percent higher than a year ago, but well below the inflation-adjusted peak of $90 set in 1980.
Energy traders have attributed the recent runup to a wide range of concerns, including pipeline sabotage in Iraq, growing demand in China and the weakness of the dollar against other currencies. They also say increased speculation by hedge funds is magnifying the runup.
Lorraine Tan, director of research at Standard & Poor's investment services in Singapore, said the timing of OPEC's actions is crucial in affecting crude prices.
"If OPEC acts quicker, prices would come off," she said.
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We are within spitting distance of the $80/bbl price where we meet the oil shocks of the 70s in real terms. Ooops! |
