Oil prices topped 81 dollars a barrel for the first time on Tuesday, setting another record high amid fears of critically tight supplies for the winter season in the United States.
Opec’s announcement last week that it would pump an extra 500 000 barrels per day from November has failed to stop the surge in price, with some analysts predicting it could keep soaring to $85 and beyond.
New York’s main futures contract, light sweet crude for October delivery, jumped 57 cents to $81,14 in Singapore trade at 5.56am GMT.
The jump followed a run overnight in New York, when the contract spiked $1,47 to $80,57 per barrel after an earlier intra-day high of $80,70.
“The door to 80 has been opened,” said Victor Shum, senior principal at Purvin and Gertz Inc energy consultants in Singapore.
He said the mood had changed on Monday as speculators drove up the price over concerns about tight supply in the winter months.
“In the near-term, the market has limited downside supply risks,” he said.
Brent North Sea crude for November delivery was 23 cents higher at $77,21 a barrel.
Abdalla Salem El-Badri, chief of the Organisation of the Petroleum Exporting Countries (Opec), said on Friday that $80 a barrel for oil did not reflect the current supply and demand situation.
But Goldman Sachs analysts said the Opec decision to boost output came too late to keep prices down.
“We believe that this will be too little, too late, barring an outright collapse in demand, and now expect inventories to draw to critical levels this winter,” they wrote in an analyst note.
Tony Nunan, of Mitsubishi’s international petroleum business in Tokyo, agreed demand is the driving factor despite Opec’s production increase.
“As demand increases in the fourth quarter we’re going to see drawdowns in inventory and I think that’s starting to play here,” Nunan said.
Goldman Sachs said they were raising their year-end 2007 price forecast to $85 per barrel, “with a high risk of a spike above $90 per barrel,” and said crude could hit $95 by the end of next year.
Shum said there were “widespread worries” over the Goldman Sachs report.
“The mood got a lot more bullish,” he said.
London-based analysts, the Centre for Global Energy Studies, said on Monday that the world “will remain short of oil and prices will continue to rise” unless Opec put enough crude onto the market at prices to attract buyers.
Investors are worried that crude supplies are inadequate to meet demand as winter approaches in the US, the world’s biggest energy consumer, and other countries in the Northern Hemisphere.
Concerns spiked after the US Department of Energy reported last Wednesday that US crude inventories fell by a sharper-than-expected 7,1-million barrels during the previous week.
The drop was almost three times steeper than market expectations and came as the closure of several US refineries in the path of Hurricane Humberto also pressured prices.
An energy policy adviser to industrialised countries, the International Energy Agency, last week lowered its predictions for global crude demand this year and next because of ongoing turbulence across financial markets.
But Shum said the market has put those concerns aside as the US Federal Reserve prepares to address fears about a global economic slowdown. At its policy meeting on Tuesday, the Fed was widely expected to cut interest rates to cushion the world’s largest economy from a housing slump.
“In part, the bullish trading we see is also a result of the US Fed doing what it takes to bolster the US economy,” Shum said. – AFP