LONDON, June 23: World oil prices rallied strongly on Thursday on mounting concerns that demand for energy products may not be satisfied during the fourth quarter amidst tight supplies, analysts said.
New York’s main contract, light sweet crude for delivery in August, jumped 86 cents to $58.95 a barrel in early deals after hitting as high as $59.30.
In London, the price of Brent North Sea crude oil for delivery in August gained 80 cents to $57.38 per barrel.
Earlier this week crude futures struck record high points of $59.70 in New York and $58.58 in London on supply concerns amidst strong demand for energy from China and the United States.
But a predicted push through $60 failed to materialize in large part because the Department of Energy crude inventories numbers, published on Wednesday, contained no major surprises.
“Robust demand continues to reinforce our view of the likelihood of further price increases,” Barclays Capital analyst Kevin Norrish said.
Crude oil reserves fell by 1.6 million barrels in the week ending June 17 to 327.4 million barrels, the DoE said.
Gasoline, or petrol, inventories rose 200,000 barrels to 215.9 million in the week. Distillates, used for heating oil and diesel, rose by 1.3 million barrels to 111.5 million.
“The report did not prove to be overtly bullish but still showed a bit of tightness, which gave the market all the incentive it needed to push higher at a time when the high prices do not appear to be slowing demand,” analysts at the Sucden brokerage firm said.
“Consumption for diesel has been running at over 6.0 per cent above year-ago levels, fuelling fears that refiners maximizing production of motor fuels will not be able to build pre-winter heating oil inventories later in the year,” they added.
Prices hit record peaks earlier this week as speculators worried that refineries will struggle to turn enough crude oil into heating fuel to meet fourth-quarter demand during the northern hemisphere winter.
Those worries persisted, despite news that a threatened strike by oil workers in Norway had been averted late on Tuesday.
“There certainly does not seem to be much out there to really pull prices back down at the moment,” said Daniel Hynes, a commodities analyst with ANZ bank.
“The market is also still unsettled about the supply side.”
Meanwhile, state-run energy firm China National Offshore Oil Corporation (CNOOC) announced a bid on Thursday to buy US oil major Unocal for $18.5 billion cash, trumping a rival offer by Chevron Corporation.
CNOOC said it was proposing a friendly merger, offering $67 a share for the California-based company in a deal that underlines China’s drive to secure energy resources overseas to sustain its rapid economic growth.—AFP
