Oil prices strike historic high.
LONDON: World oil prices hit record levels on Wednesday here and in New York on heightened supply concerns and ahead of crucial US stockpiles data that was expected to show lower crude and gasoline reserves.
Expectations of falling stockpiles in the United States, the world’s biggest oil consumer, have added to concerns about tight supply, especially going into the northern hemisphere winter, dealers said. New York’s main contract, light sweet crude for delivery in September, gained 37 cents to 62.26 dollars per barrel in electronic dealing after earlier hitting a record 62.31 dollars.
That beat Monday’s record of 62.30 dollars, made on the back of lingering concerns for crude products later in the year. In London on Wednesday, the price of Brent North Sea crude oil for delivery in September added 54 cents to 61.16 dollars, a fresh high point, beating the previous record of 60.98 dollars also set on Monday.
"Crude oil continues its steady march upwards," said Barclays Capital analyst Sudakshina Unnikrishnan. "With a spate of (US) refinery problems placing concern over gasoline availability, the market is likely to react positively to another fall in gasoline inventory in today’s oil releases." The US Department of Energy (DoE) was scheduled to release its weekly snapshot of crude stocks later on Wednesday.
Adjusted for inflation, oil prices remain far below levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today’s money. Market concerns are focused on fears there may not be enough key products such as heating oil for the fourth quarter, with tight supplies to meet robust "worldwide demand. Phil Flynn, a broker with Chicago-based Alaron Trading, said a major reason for the price spike was the solid growth in the US economy, singling out the expansion in the manufacturing sector.
The US economy grew 3.4 per cent in the second quarter while the US ISM manufacturing index also rose to 56.6 per cent in July from 53.8 in June, showing American industries are in expansion mode. "The big leap in the number extends growth in US manufacturing for the 26th consecutive month," Flynn said. "July was the strongest showing of the year and sends signals that demand for energy will remain robust as we round out the rest of this year."
Problems in US refining capacity "come at a critical time" and add to the market jitters, he added. Although consumers have access to large supplies of heavy, sour crude, refiners prefer light, sweet oil because of its low sulphur content and relatively high yields of gasoline, heating oil as well as diesel and jet fuel. The Brent contract, based on light, sweet crude oil taken from the North Sea, is used to price more than 65 per cent of the world’s traded crude oil supplies, according to London’s International Petroleum Exchange (IPE).
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