Crude Prices Surge As OPEC Estimates Supplies Are Falling While Demand Is Growing
Monday, October 15th 2007, 10:46 am
By: News On 6
NEW YORK (AP) _ Oil prices surged above $85 a barrel Monday for the first time after OPEC said crude production by non-OPEC countries is falling even as global demand for oil is rising.
Prices were also supported by concerns Turkish forces will pursue Kurdish rebels into Iraq, disrupting oil supplies, and by technical buying by investment funds.
Despite the Organization of Petroleum Exporting Countries' decision last month to boost its production by 500,000 barrels per day beginning next month, the rest of the world will likely produce 110,000 fewer barrels of oil per day than expected, OPEC said in a report.
At the same time, fourth quarter demand for crude oil will grow by 100,000 barrels a day over last year, OPEC said.
The estimates add to a picture of a tight market for crude. Last week, the Energy Department reported that domestic crude inventories fell during the week ended Oct. 5 when they had been expected to rise. And the International Energy Agency concluded that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.
``The fact that U.S. crude inventories fell yet again ... reinforced the market's underlying concern that demand has yet to slow down sufficiently to allow stocks to build, while supply is also perceived to be struggling to catch up,'' wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Light, sweet crude for November delivery rose $1.31 to $85 on the New York Mercantile Exchange after rising as high as $85.30, a record intraday price.
Despite the gains, oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
In other Nymex trading, gasoline futures rose 3.85 cents to $2.1236 a gallon, while heating oil futures rose 3.16 cents to $2.278 a gallon.
Nymex natural gas futures rose 34.2 cents to $7.316 per 1,000 cubic feet on worries a storm in the Caribbean Sea will move north and develop in strength, threatening key oil and gas infrastructure in the Gulf of Mexico.
In London, Brent crude futures rose $1.15 to $81.70 a barrel on the ICE Futures exchange.
At the pump, gas prices fell 0.4 cent overnight to a national average of $2.757 a gallon, according to AAA and the Oil Price Information Service.
The Turkish government's decision on Monday to ask Parliament for permission to pursue Kurdish rebels into Iraq stoked worries that hostilities will disrupt oil supplies, analysts said.
``Oil out of the northern (Iraq) fields has been erratic for some time,'' said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. ``But complete disruption would definitely be bullish for this market.''
Technical buying by investment funds is also driving oil's record run, analysts say. Data released Friday show that speculative buying of oil contracts increased last week.
Many investment funds set rules to automatically buy or sell oil contracts when prices hit certain levels. In recent days, as oil has pushed into new record territory, several of these ``resistance'' prices levels have been broached. When that happens buying ensues, driving prices even higher.
``Funds tend to trade more on the technicals,'' Rafield said.