Oil boils to record $135-plus a barrel as dollar continues to drop
- From: "The Honorable Dr. Rocky Roads Presiding Judge" <wookiee@xxxxxxx>
- Date: Thu, 22 May 2008 14:35:56 -0600
"Oil boils to record $135-plus a barrel as dollar continues to drop"
The Associated Press
5/22/2008
NEW YORK - Oil prices rose above $135 a barrel for the first time Thursday,
with supply worries, global demand and an ever weakening U.S dollar driving
crude futures up.
The world's top energy watchdog is preparing a sharp downward revision of
its oil-supply forecast, according to a report in The Wall Street Journal.
Light, sweet crude for July delivery rose as high as $135.09 before falling
back slightly. By midday in Europe, the contract stood at $134.37 a barrel
in electronic trade on the New York Mercantile Exchange, up $1.20 on
Wednesday's close of $133.17.
That settlement price, up $4.19 on Tuesday's close, marked NYMEX crude's
largest one-day price advance since March 26.
Meanwhile, July Brent crude on the ICE Futures exchange in London also
reached a new record of $135.13 a barrel Thursday. By midday in Europe, it
had retreated to $134.35, a gain of $1.65 on its Wednesday close.
"Simply put, this is a market you cannot afford to be short in," said U.S.
analyst and trader Stephen Schork about Brent futures in his Schork Report.
With gas and oil prices setting new records nearly every day, analysts have
begun to wonder what might stop prices from rising. There are technical
signals in the futures market, including price differences between near-term
and longer-term contracts, that crude may soon fall. But with demand for oil
growing in the developing world, and little end in sight to supply problems
in producing countries such as Nigeria, few analysts are willing to call an
end to crude's rally.
"The sentiment in the market is very bullish at the moment," said David
Moore, commodity strategist with the Commonwealth Bank of Australia in
Sydney. "The U.S. dollar was weaker last night, and also the U.S. EIA report
showed an unexpected decline in U.S. commercial crude oil inventories, so
there's a combination of factors pushing the oil prices higher."
Crude prices breezed past $130 early Wednesday, then accelerated when the
U.S. Energy Department's Energy Information Administration said U.S. crude
inventories fell by more than 5 million barrels last week. Analysts had
expected a modest increase.
Investment bank Goldman Sachs last week revised its oil price forecast for
the second half of 2008 from $107 to $141 a barrel. But some analysts saw
the new target becoming a reality much sooner.
"Futures are moving so fast that under the current volatility that goal
could already be reached within the end of the week," said a report by
Olivier Jakob of Petromatrix in Switzerland.
Some analysts say crude has been boosted in recent days by especially strong
demand for diesel in China, where power plants in some areas are running
desperately short of coal.
The Wall Street Journal reported Thursday that the Paris-based International
Energy Agency is in the middle of its first attempt to comprehensively
assess the condition of the world's top 400 oil fields.
For years the IEA has predicted that supplies of crude and other liquid
fuels will arc gently upward to keep pace with rising demand, topping 116
million barrels a day by 2030, up from around 87 million barrels a day
currently.
The agency is now concerned that aging oil fields and diminished investment
mean that companies could struggle to surpass 100 million barrels a day in
production over the next two decades, the paper reported.
That view has been echoed by many analysts.
"The market is really structurally tight ... oil demand is not growing that
fast but supply is constrained," said Victor Shum, an energy analyst with
Purvin & Gertz in Singapore.
In the U.S. Energy Information Administration report, gasoline inventories
also fell, which took the market by surprise. Inventories of distillates,
which include heating oil and diesel fuel, rose less than analysts surveyed
by Platts had expected.
While the dollar gained slightly against the euro and the Japanese yen from
overnight levels, it fell against the British pound and showed a new
downward momentum.
The 15-nation euro bought $1.5765 in morning European trading, down from
$1.5780 in late New York trading Wednesday.
The British pound bought $1.9786, up from $1.9689 late Wednesday. The dollar
declined to 103.25 Japanese yen from 104.17 yen.
Investors see hard commodities such as oil as a hedge against inflation and
a weak dollar and pour into the crude futures market when the greenback
falls. A weak dollar also makes oil less expensive to buyers dealing in
other currencies.
Many investors believe the dollar's protracted decline over the past year
has been the most significant factor behind oil's rise from about $66 a
barrel a year ago.
In other Nymex trading, heating oil futures rose 8.46 cents to $3.9930 a
gallon while gasoline prices added 3.79 cents to $3.4344 a gallon. Natural
gas futures rose 9.5 cents to $11.735 per 1,000 cubic feet.
http://www.thetrucker.com/News/Stories/2008/5/22/Oilboilstorecord135-plusabarrelasdollarcontinuestodrop.aspx
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