Crude Prices Jump Sharply, Crossing $93 A Barrel
Monday, October 29th 2007, 7:09 am
By: News On 6
NEW YORK (AP) _ Oil futures rose Monday, but pulled back from a new trading record above $93 set after Mexico's state oil company suspended a fifth of its oil production due to stormy weather.
The news that Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production came amid rising political tensions in the Mideast, a weakening U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices.
``Mexico shut in production for a few days,'' which will likely disrupt imports and cut domestic oil inventories further, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
Oil prices have jumped 9 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. The Mexican oil fields are expected to return to service later this week.
Prices were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
However, many analysts argue that oil prices have risen to levels not supported by crude's underlying demand and supply fundamentals, and are due for a correction.
Light, sweet crude for December rose 33 cents to $92.19 a barrel on the New York Mercantile Exchange after rising as high as $93.20 in overnight trading. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
Other Nymex energy futures were also higher. Gasoline for November delivery rose 2 cents to $2.294 a gallon, while November heating oil rose 1.09 cent to $2.4434 a gallon.
Natural gas futures rose 11.2 cents to $7.33 per 1,000 cubic feet.
In London, December Brent crude advanced 50 cents to $89.19 a barrel on the ICE Futures exchange.
At the pump, the national average price of a gallon of gas rose 0.7 cent overnight to $2.856 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen nearly a dime in two weeks.
The weak dollar was also supporting energy futures. The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.
Oil prices could get another boost this week if the Federal Reserve cuts interest rates.
``The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general,'' wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.
``There is not shortage of news that speculators can use now to push oil prices higher,'' said Fadel Gheit, an analyst at Oppenheimer & Co.