/ 29 October 2007

Oil hits record high above $93

Oil prices jumped to fresh historic highs on Monday, breaching $93 for the first time on mounting concerns about tight energy supplies worldwide, analysts said.

Investors pushed up crude futures to new peaks as more bad news in the shape of Mexican production cutbacks came on top of already serious tensions in the Middle East.

Also supporting oil prices on Monday was a weak dollar and Opec’s (The Organisation of the Petroleum Exporting Countries) reluctance to increase output ahead of the northern hemisphere winter when demand for heating fuel spikes.

“There are supply concerns around,” CMC Markets trader Nas Nijjar said.

New York’s main futures contract, light sweet crude for delivery in December, hit a record $93,20 per barrel before settling back to $92,89, a rise of $1,03 from Friday’s close.

Brent North Sea crude for December delivery hit a record $90, before it too slipped back to $89,49 for a gain of 80 cents.

Oil prices have rocketed by about 50% over the past year, although adjusted for inflation they remain below levels reached after the 1979 Iranian revolution.

Current prices would have to go just above $100 to reach outright as well as nominal highs, according to economist calculations.

“What we see [in Monday’s trade] is a continuation of the trend that was in place on Friday,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia.

“Geopolitical tensions, issues regarding tensions between Turkey and Kurdish rebels [in Northern Iraq] … those sort of factors have added to oil prices,” he added.

Tension between Turkey and Kurdish militants in northern Iraq has fuelled concerns that energy supplies from the Middle East — where Iran’s nuclear programme has already triggered sanctions from Western nations — could be disrupted.

Given the current situation, prices are likely to rise further and $100 for oil cannot be ruled out, Moore said.

“I wouldn’t be surprised if in the very short term we see oil prices continue to move a little bit higher,” he said.

“It is certainly possible they will move higher … I personally don’t believe we will see oil prices at $100 but it is not impossible given the situation.”

Also pushing up oil prices on Monday were reports that Mexico had cut some crude output because of a storm, said Dariusz Kowalczyk, a senior investment strategist with CFC Seymour.

Kowalczyk also predicted that prices were headed north given the prevailing conditions.

“I think pretty much at this point anything goes,” he said.

The dollar’s continued weakness was also bolstering oil prices. — AFP