LONDON, March 16: World oil prices soared on Wednesday to a new record high point above $56 in New York after falls to US crude stockpiles, and despite a move by Opec to hike its output quota with immediate effect, dealers said. New York’s main contract, light sweet crude for delivery in April, surged $1.25 to reach as high as $56.30 a barrel in early deals. It beat the previous record of $55.67 reached on October 25, 2004.
In London, the price of Brent North Sea crude oil for delivery in April jumped $1 to reach also a new record of $54.85 a barrel. The Brent price beat the previous record of $54.30 reached on March 9. “Unbelievable,” said Phil Flynn at Alaron Trading about the new record highs.
“We had a combination of things: the big drop in gasoline inventories caught the market by surprise, plus the fact that China talked on Tuesday about building some strategic petroleum reserves using their foreign exchange reserves.”
This development was “very bullish” for oil prices, he said. The US Department of Energy (DoE) said gasoline supplies dropped by 2.9 million barrels and distillate stocks fell by 1.9 million barrels in the week ended March 11.
The falls sparked worries that supplies would struggle to keep up with robust global demand for energy. The DoE meanwhile said that US crude inventories rose by 2.6 million barrels.
The surge in prices came despite a move by Opec to hike its output quota with immediate effect on Wednesday.
And it came amid comments from US President George W. Bush expressing concern over high price levels.
“I am concerned about the price of energy,” he said at a White House press briefing.
Meeting in Iran, the Organisation of Petroleum Exporting Countries agreed to raise its crude oil production ceiling from 27 to 27.5 million barrels per day, and said in a statement it would consider raising quotas by a further 500,000 bpd if oil prices remain high.
“This decision is a reaffirmation of Opec’s commitment to ensuring adequate supplies consistent with robust economic growth, in particular in the economies of the developing world,” it said.
“The conference decided to increase the production ceiling to 27.5 million barrels per day effective immediately.
“The conference further authorised the Opec president, after consultations with fellow heads of delegations, to allow an additional 500,000 barrel per day increase in the ceiling by its next meeting on June 7 should prices remain at current levels or continue to further rise,” it added.
“We hope the market gets a positive signal from this meeting, because Opec did its most to have a stable market with minimal fluctuation,” Iranian Oil Minister Bijan Namdar Zanghaneh said.—AFP
