Oil price hits fresh peak of $82.51

Published September 20, 2007

LONDON, Sept 19: New York oil prices surged to a record high $82.51 per barrel on Wednesday following news that American crude reserves tumbled last week.

New York’s main futures contract, light sweet crude for delivery in October, hit the historic peak after publication of the US Department of Energy (DoE) weekly report.

In London, the price of Brent North Sea crude for November delivery jumped to $78.49 per barrel — which was not far off its all-time high of $78.64 that was struck in August 2006.

The DoE said on Wednesday that US crude inventories plunged by 3.8 million barrels to 318.8 million barrels in the week ending September 14.

That marked the tenth successive weekly drop and was almost double analysts’ consensus forecasts for a fall of about 2.0 million barrels.

Prices were “led by the US crude inventories,” said AG Edwards analyst Eric Wittenauer.

American gasoline or petrol stockpiles rose by 400,000 barrels last week, the DoE added, confounding market expectations for a drop of 1.0 million.

Distillates, which include diesel and heating fuel, advanced by 1.5 million barrels, which tallied with forecasts for a 1.23-million-barrel gain.

In later deals, New York crude pulled back to stand at $81.51, unchanged from the close on Tuesday. London Brent meanwhile stood 12 cents higher at $77.71 per barrel.

In recent days, oil prices in New York have streaked to record highs on concerns about tight global supplies and rising demand.

Traders are fearful of a supply crunch in the fourth quarter of 2007 as heating fuel demand hits a peak during the cold northern hemisphere winter months.

New York crude had surged past $82 per barrel on Tuesday after the US Federal Reserve slashed interest rates to boost the flagging United States economy — which is the biggest global market for crude oil.

For some time, oil market traders have been concerned that an economic slowdown in the US would dampen crude demand and lead to lower prices.

“Crude oil prices... rose in the wake of the Fed’s decision to cut rates by 50 basis points,” Australia’s Commonwealth Bank said in a market commentary.

“The rate cut is seen as reducing the risk of a severe slowing of the US economy which may also have impacted on oil demand.”

Analysts at US investment bank Goldman Sachs have said oil could soar as high as $90 a barrel between now and the end of the year and could reach $95 by the end of 2008.

Industry analysts argue that a recent Opec decision to boost output by 500,000 barrels a day was insufficient and came too late to meet rising winter-related demand.—AFP

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