Oil price vaults past $126

The price of New York crude oil soared above $126 per barrel on Friday, lifted by speculative demand amid concerns about tight global energy supplies, analysts said.

New York’s main oil futures contract, light sweet crude for June delivery, spiked as high as $126,20 in London trading hours.

London’s Brent crude contract hit an all-time pinnacle of $125,90.

Sucden analyst Michael Davies said that there was “keen interest in the oil market by the (investment) funds, which are currently being attracted by oil’s rapid price appreciation this year.

“This probably explains the move higher over the last few days,” he added.

Prices have rocketed to fresh records every day this week on the back of unrest in key producer Nigeria and other ongoing supply worries.

The price of oil has soared by 25% since the start of 2008 and has doubled since the same stage last year — when it stood at about $62.

Oil vaulted above the psychological $100 mark in January and has since jumped above $110 and $120, as the market was also energised by the weak dollar and solid demand from Asian powerhouse economies China and India.

Prices continued to bolt higher on Thursday after the Organisation of the Petroleum Exporting Countries (Opec) insisted the market was well-supplied and driven by speculators.

Opec secretary general Abdalla Salem El-Badri said on Thursday that there was no shortage of crude, brushing aside United States calls for higher output to dampen runaway prices.

“There is clearly no shortage of oil in the market,” El-Badri said in a statement.

The 13-member Opec produces about 40% of the world’s oil, with current output at about 32-million per day.

El-Badri also maintained Opec’s stance that oil-market volatility has been driven by financial market developments and the increased flow of speculative funds into oil futures.

“The turmoil in some global equity markets and the considerable depreciation in the US dollar have encouraged investors to seek better returns in commodities, particularly in the crude oil futures market. This has driven prices higher,” he added.

However, analyst Kevin Norrish at Barclays Capital argued that the recent strengthening of the dollar did not support El-Badri’s argument.

“Given that the US dollar has marginally strengthened against the euro over the past week, while [New York crude] prices have risen by 9% to reach all-time high prices, there appears to be little evidence to support his comment,” Norrish said. — AFP

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