Oil Prices Rise On Demand Forecast
Friday, December 14th 2007, 8:44 am
By: News On 6
Oil prices rose Friday on forecasts that oil demand would grow faster than previously expected next year with new buyers in the market. Gains were held back, however, by the dollar gaining strength against the euro.
The International Energy Agency raised its forecast for world oil demand growth in 2008 by 170,000 barrels a day to 2.5 percent, compared with 2.3 percent in its previous report. It said overall demand was now expected next year to reach 87.8 million barrels a day, Dow Jones Newswires reported.
The security watchdog for the Organization for Economic Cooperation and Development, or OECD, said its upward revision was based on an expected increase in demand for ethane and other petrochemical feedstocks in the Middle East, notably Saudi Arabia.
The forecast assumed continuing robust oil demand growth in non-OECD countries, where subsidies protect people from the impact of high oil prices, and normal winter weather.
On Friday, light, sweet crude for January delivery rose 20 cents to $92.45 a barrel in electronic trading on the New York Mercantile Exchange by the afternoon in Europe.
The contract fell $2.14 to settle overnight at $92.25 a barrel. It had jumped $4.37, or 4.9 percent, on Wednesday to its highest close since Nov. 27 on unexpected declines in U.S. crude stockpiles.
Prices fell more than $2 a barrel in the previous session, as investors sold futures contracts on expectations of an ongoing price slide.
After a gain of almost 5 percent on Wednesday, two causes of the midweek surge in oil prices evaporated Thursday when the U.S. dollar strengthened and Exxon Mobil Corp. said a Texas refinery suffered no production outages from a fire.
In London, January Brent crude added 45 cents to $92.57 a barrel on the ICE Futures exchange.
Some analysts said fresh buying by large funds also was helping push prices higher.
``It seems that a large amount of the buying was fresh buying, and it looks like it may have come from large traders who got out before Thanksgiving _ and who may have decided to get long before any New Year rush to buy for 2008,'' said Peter Beutel, president of the U.S. energy risk management firm Cameron Hanover. ``It suggests that prices may now want to make another run at $100 (a barrel) and possibly beyond.''
Crude supplies fell 700,000 barrels during the week ended Dec. 7, according to a weekly inventory report from the U.S. Energy Department's Energy Information Administration. Analysts surveyed by Dow Jones Newswires had expected a 100,000 barrel increase.
Total oil and product inventories have fallen for several straight weeks, which is normal for this time of year, but remain high by historical standards, according to the EIA.
An increase in oil supplies at the closely watched Nymex delivery terminal in Cushing, Oklahoma, however, has pushed the price of January crude below the price of February crude. It's the first time since August the price of a front-month contract has fallen below a contract for later delivery.
In electronic trade Friday, February crude rose 31 cents to $92.77 a barrel Friday.
A firming of the dollar Friday neutralized another reason many analysts have cited for oil's run last month above $99 a barrel.
The U.S currency gained on the euro after a report showed inflation in the 13 nations that use the euro surged to an annualized rate of 3.1 percent in November, the highest level since the currency was first used in 2002 and above an earlier estimate.
In morning European trading the euro bought $1.4494, down from $1.4624 the night before in New York.
Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Heating oil futures added 2.81 cents to $2.6428 a gallon (3.8 liters), while gasoline prices rose 1.41 cents to $2.3900 a gallon.
Natural gas futures fell 9.3 cents to $7.10 per 1,000 cubic feet.