Oil smashed past $135 a barrel for the first time on Thursday, continuing its astonishing rise following unexpected drops in United States crude and petrol stocks in a tight market, dealers said.
Large institutional investors continued to pile money into oil, which is giving better returns than investments in stocks and bonds, further heating up prices, they said.
The Commonwealth Bank of Australia said in a market commentary that the “oil price also benefited from further US dollar weakness”.
New York’s main oil futures contract, light sweet crude for July delivery, briefly rose to a high of $135,04 a barrel before easing to $134,59 in Asian afternoon trade, up $1,42 from its US close.
The benchmark futures contract had closed a whopping $4,10 higher at a record $133,17 on the New York Mercantile Exchange, and continued its upward spiral in after-hours electronic trade.
London’s Brent crude contract for July was also busting records, rising to a high of $134,50 before pulling back to trade at $134,36, smashing its intraday peak of $133,34 set a day earlier.
In unadjusted terms, New York oil has risen more than fourfold compared with five years ago when it was trading at just below $30 a barrel.
“Currently, market psychology is trumping fundamentals,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
“The psychology is that the oil market is tight. Even though there is no shortage, global oil demand continues to grow and supply growth is restrained,” he added.
“Oil has performed better than equities and bonds. There is money looking for better returns and oil has offered better returns and continues to offer better returns.”
Oil’s relentless rise appears to fulfil predictions from some analysts of a super-spike that could take oil to $150 to $200 a barrel and sent stock markets across Asia tumbling.
With prices already on the rise, the US Department of Energy’s weekly snapshot of energy inventories, which unexpectedly showed declines, added a further push, analysts said.
The report on Wednesday showed US crude oil stocks fell in the week ended May 16 by 5,4-million barrels to 320,4-million barrels. Most analysts had expected a build of 300 000.
Petrol inventories dropped by 800 000 barrels, to 209,4-million, confounding expectations of a gain of 250 000 barrels.
The news was particularly market-sensitive, coming days ahead of the US summer-holiday driving season that kicks off this weekend for the Memorial Day holiday on Monday.
Americans have already begun buying less petrol as prices at the pump hit new highs. The change in driving habits is raising concerns about a slowdown in consumer spending, the main engine of the world’s biggest economy. — AFP