Oil prices hit fresh record highs on Wednesday, with New York crude at $94 per barrel after news that United States crude inventories had slumped last week, traders said.
“The market is clearly reacting to the larger-than-expected drop in crude oil inventories,” said Citigroup analyst Tim Evans.
New York’s main futures contract, light sweet crude for delivery in December, beat the previous high of $93,80 that was set on Monday.
At the same time, Brent North Sea crude for December delivery jumped to $90,74, which also smashed the previous record of $90,49.
Over the course of Wednesday, prices rocketed by as much as $4 to $5 in highly volatile trade.
The fresh historic peaks came after the US Department of Energy (DoE) announced on Wednesday that crude inventories tumbled by 3,9-million barrels to stand at 312,7-million barrels in the week ending October 26.
That shocked the market because consensus forecasts had been for a gain of 400 000 barrels.
The United States is the world’s biggest energy consumer and therefore the state of its inventories is a key concern.
At the same time, the market set aside news that stockpiles of US distillates, which include diesel and heating fuel, had gained 800 000 barrels. That comfortably beat market expectations for a drop of one million barrels.
This week, the oil market has been rocked by three days of volatile trading linked to worries about tight global energy supplies.
After striking record levels on Monday, prices plunged by around $3 on Tuesday as traders cashed in some of their profits.
However, news of dwindling US crude reserves sent prices rocketing once more.
Later on Wednesday, New York crude stood at $93,69, up $3,31 from Tuesday’s close, while London Brent traded at $90,24 for a gain of $2,80.
The volatile price action “reflects current trading conditions characterised by market participants [being] prone to test new highs but still uneasy over the sustainability of the progress made”, said Kevin Norrish at Barclays Capital.
“In this context, volatility is set to stay high and prices will likely react sharply on the back of little fresh news.”
Prices had fallen heavily on Tuesday as Mexico’s state oil company Pemex said it would resume 600 000 barrels per day of production, which had been closed down ahead of a tropical storm. — AFP