Sun, May 16, 2004 - Page 10 News List

Light sweet crude hits an all-time high of US$41.56

SUPPLY FEARS Analysts think that prices may hit US$42 to US$43 in the near future, and maybe higher if the security situation in the Middle East doesn't improve

AFP , NEW YORK

New York's crude oil contract shot to an all-time high US$41.56 a barrel Friday, chased higher by terrorism fears in Iraq and Saudi Arabia and hot global demand.

New York's benchmark light sweet crude contract for delivery in June spiked at US$41.56 before easing a little to finish at US$41.38, still up US$0.30 from the previous day.

The price broke the previous record of US$41.15 set in October 1990, in the run-up to the Gulf War. Adjusted for inflation, current prices are still far below the 1990 high, however.

Brent North Sea crude for June delivery rose US$0.27 to close at US$38.76 in London.

"The relentless rally is continuing on crude oil and gasoline," said Fimat USA market analyst Marshall Steeves.

Traders were casting aside promises by Saudi Arabia to open the taps, and instead sweating about the dangerous backdrop to the Middle East oil market, he said.

Concerns were heightened May 1 when gunmen attacked a Saudi oil facility at Yanbu port, killing five employees of the Swiss engineering group ABB and a Saudi national guard soldier.

Exports of Iraqi crude, also, were still lagging at 1 million barrels per day several days after saboteurs torched a vital feeder pipeline in the south of the country, oil officials said Thursday.

"Concerns have arisen that terrorists may actually target oil production per se and that could really throw a wrench into supply security," Steeves said.

Gasoline futures touched a record US$1.42 for a gallon of regular unleaded to be delivered in June. The gasoline contract closed at US$1.4095, up US$0.0096 from Thursday.

Traders worried about supplies of gasoline in the high demand period of summer, particularly because varying state-to-state rules on gasoline content made it harder for refiners to meet demand, Steeves said.

The US Department of Energy said Wednesday that commercial stocks of gasoline fell by 1.5 million barrels to 202.5 million in the week ended May 7.

The crude oil price could hit US$42 to US$43 a barrel in the near term, Steeves said.

But the market may begin to cool if gasoline prices start to come down after the start of the summer "driving season" when American roads are busiest, he added.

Further supporting the market, the International Energy Agency this week said booming economic growth was spurring world demand for oil at the fastest rate in 16 years.

The agency raised this year's oil demand forecast by 330,000 barrels per day to 80.6 million barrels per day.

Traders also fear that the Organization of Petroleum Exporting Countries has little room to raise production further.

OPEC has signaled it could boost its output quotas to help cool world prices.

"Unfortunately, I don't think OPEC have got that much control over this market anymore," Macquarie Bank trader Jon House said in London. "People now question whether they have got the oil necessary."

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