Oil prices surge following Opec supply report
Oil prices surged above $85 a barrel on Monday for the first time after the Organisation of the Petroleum Exporting Countries (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 Opec’s decision last month to boost its production by 500Â 000 barrels per day beginning next month, the rest of the world will likely produce 110Â 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 100Â 000 barrels a day over last year, Opec said.
The estimates add to a picture of a tight market for crude. Last week, the United States Energy Department reported that domestic crude inventories fell during the week ended October 5 when they had been expected to rise.
And the International Energy Agency concluded that oil inventories held by the world’s largest industrialised countries have fallen below a five-year average.
“The fact that US 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, in a research note.
Light, sweet crude for November delivery rose by $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 by 3,85 cents to $2,1236 a gallon (3,8 litres), while heating oil futures rose by 3,16 cents to $2,278 a gallon.
Nymex natural-gas futures rose by 34,2 cents to $7,316 per 1Â 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 by $1,15 to $81,70 a barrel on the ICE Futures exchange.
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. “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 on Friday shows that speculative buying of oil contracts increased last week.
Many investment funds set rules to buy or sell oil contracts automatically 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.—Sapa-AP
Associated Press writers Pablo Gorondi in Budapest, Hungary and Gillian Wong in Singapore contributed to this report