Concern mounts as oil price nears $120

International concern mounted as world oil prices edged closer to $120 a barrel Wednesday and the world’s top producer called for calm.

Analysts said a weakening United States dollar, supply worries in Nigeria and the reluctance of the Organisation of the Petroleum Exporting Countries (Opec) to increase output have all contributed to the price surge.

In afternoon trade, New York’s main oil futures contract, light sweet crude for delivery in June, rose nine cents to $118,16 per barrel.


The May contract expired on Tuesday after closing at a record $119,37 per barrel at the New York Mercantile Exchange, where it earlier hit an all-time intraday peak of $119,90.

Global supply jitters have seen oil contracts traded in New York spike by more than $57 in the past year. Price records in New York and London have been broken almost daily over the past week.

Brent North Sea crude for June delivery rose 15 cents to $116,10 a barrel, after settling at an all-time high of $115,95 on Tuesday in London.

The contract earlier touched a record $116,75 in intraday activity.

“Market sentiment is bullish in the immediate term,” said Victor Shum, senior principal of Purvin and Gertz energy consultancy in Singapore.

“The weak US dollar, real supply disruption in Nigeria … are pushing prices higher”.

But Shum said there is increasing concern that the rally in oil pricing “has been too much and too fast”.

Ministers from 74 countries attending the International Energy Forum in Rome on Tuesday said oil prices should be at levels acceptable to producers and consumers, “to ensure global economic growth, particularly in developing countries”.

United States President George Bush expressed concern at the impact of high price levels on consumers.

Saudi Arabia’s Petroleum Minister, Ali al-Naimi, on Tuesday called for calm in the face of runaway oil prices. He said the world is not running out of oil.

The root of the problem was primarily due to “limited capacity along the entire supply chain … at its heart, this is not an energy resource issue; it is primarily an investment issue”, he said at the Rome forum.

Saudi Arabia is the biggest producer in Opec, which on Tuesday said that it plans to increase its production capacity by five million barrels per day (bpd) by 2012.

The cartel’s secretary general, Abdalla Salem El-Badri, said Opec aimed to boost production capacity by nine million bpd by 2020. Current Opec output stands at about 32-million bpd.

Shum said Opec’s move would have little impact in the near term.

“Even though Opec has promised to increase production capacity, the long-term supply increase does not resolve the main factors that are underpinning prices now,” he said.

A weakening US dollar has spurred oil demand because dollar-priced oil becomes cheaper for buyers holding stronger foreign currencies.

The euro surged to a record 1,6002 dollars Tuesday on renewed jitters about the US economy.

“The weak dollar is a key thing that people are looking at,” said Jason Feer, vice-president and general manager of energy market analysts Argus Media in Singapore.

Global supply worries were stoked after Anglo-Dutch oil group Royal Dutch Shell reported an output loss of 169 000 bpd from sabotage of its key pipelines in southern Nigeria.

Shell said on Monday that it might not be able to honour oil contracts for April and May after the attacks. — AFP

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

Review: Dancing awkwardly around Michael Jordan’s legacy

The Last Dance, a Netflix documentary series about basketball player Michael Jordan, is a romantic reframing of his halcyon period that fails to engage with the politics of race in America

Nancy Pelosi: Former US House speaker set to reclaim gavel

Keeping Donald Trump in check will be among the California Democrat's top challenges as she presides over the House of Representatives

Former US president George H.W. Bush dead at 94

Bush's passing comes just months after the death in April of his wife and revered first lady Barbara Bush

US-China trade needs a strategic rethink

Global prosperity requires that the multilateral free-trade system be maintained and strengthened

Trump’s presidential campaign may not be the last to successfully use scare tactics

Right-wing populism is gaining fertile ground in Europe, preying on the fears of ordinary citizens who feel excluded by 'establishment politics'.

Mbeki: Suggestions of SA-US conflict are a fabrication

There were differences between SA and the US's administrations on various matters, but these never led to bad relations, writes Thabo Mbeki.
Advertising

Subscribers only

Toxic power struggle hits public works

With infighting and allegations of corruption and poor planning, the department’s top management looks like a scene from ‘Survivor’

Free State branches gun for Ace

Parts of the provincial ANC will target their former premier, Magashule, and the Free State PEC in a rolling mass action campaign

More top stories

Mboweni plans to freeze public sector wage increases for the...

The mid-term budget policy statement delivered by the finance minister proposes cutting all non-interest spending by R300-billion.

SAA to receive R10.5-billion government bailout after all

Several struggling state-owned entities received extra funds after the medium term budget policy speech

Malawi court judges win global prize

Members of the small African country’s judiciary took a stand for democracy to international approval
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday