Oil prices dipped on Thursday but held near the previous day’s record high above $80 a barrel, as dealers watched a hurricane in the Gulf of Mexico after a sharp fall in United States crude stocks.
US crude traded 12 cents lower at $79,79 a barrel by 8.39am GMT, after climbing $1,68 on Wednesday, when it hit a record of $80,18. London Brent crude shed 27 cents to $77.41.
Prices have climbed 31% this year and have quadrupled since 2002, as investors buy into worries over real and potential supply disruptions in producers such as Nigeria and Iran, growing consumer demand and infrastructure constraints.
”There is truly a fear factor on the supply side that is shaking the market,” said Yonghun Jung of the Asia Pacific Energy Research Centre in Tokyo.
US crude stocks fell a hefty 7,1-million barrels last week to their lowest level in eight months ahead of the winter heating season, government data released on Wednesday showed.
Adding to supply concerns, Hurricane Humberto on Thursday hit the Texas coast, a major oil-producing and fuel-refining area, though industry officials have predicted little impact to operations.
Experts said Opec’s deal in Vienna on Tuesday to raise output by a half million barrels per day (bpd) starting on November 1 was not enough to reverse rising energy prices.
”The delay in the output increase seems to indicate a high degree of compromise in the mechanics of the agreement. Overall, we believe the door to $80 and beyond remains open and beckons,” said Barclays Capital in a report.
Strong oil fundamentals have lured investors looking to diversify away from markets dragged down by the US subprime mortgage crisis, and dealers said fresh fund money continued to pile into energy.
Adjusted for inflation, prices are still below the $90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq War the following year.
Oil was also getting support from concerns over Mexican supplies after a leftist militant group blew up several fuel pipelines this week, sparking fears the world’s fifth-largest producer could sink into a Nigeria-style struggle to keep exports flowing.
Worries over Opec-member Iran’s nuclear stand-off with the West and growing resource nationalisation in producer countries have also spurred investor buying this year.
The Organisation of the Petroleum Exporting Countries blames a lack of refining capacity in major consumers for high prices.
”Looking at the fourth quarter on average, there does not appear to be much downside risk to the oil price,” said Harry Tchilinguirian, oil analyst at BNP Paribas. – Reuters