Oil prices held above US$53 a barrel on Friday, marking a new record, on lingering concerns about winter fuel supplies in the US, operational snags in the Gulf of Mexico and labor strife in petroleum-rich Nigeria.
Light crude for November delivery surged US$0.64 to a new settlement high of US$53.31 per barrel on the New York Mercantile Exchange, a rise of more than US$3 per barrel from a week ago. In London, Brent crude for November delivery surged US$0.81 to US$49.71 per barrel on the International Petroleum Exchange.
"Until we reach price levels where an economic slowdown is inevitable, that means we haven't reached the high yet," said James Cordier, head trader at Liberty Trading Group Inc of Tampa, Florida.
Cordier believes "we're getting close" to the price where the global demand for oil could begin to taper off in a meaningful way, "and at that point you could have quite a correction."
While oil prices are about 79 percent higher than a year ago, they are US$27 below the peak inflation-adjusted price reached in 1981, leading many economists to conclude that the US, which is more energy efficient today, has the ability to absorb the increase without taking a big financial hit.
Still, airlines and trucking companies are getting squeezed by higher fuel costs, and retailers have blamed lackluster sales on the fact that Americans are spending more of their money getting from once place to another.
Friday's oil-price runup came as Nigerian government and labor union negotiators failed to reach an agreement on state-controlled fuel prices, setting the stage for a nationwide workers' strike on Monday in Africa's largest oil producer.
A general strike in Nigeria last year did not affect oil exports, though oil traders have pushed prices higher for months over the mere possibility of supply disruptions in Iraq, Russia and Venezuela.
The underlying concern is the world's scarce surplus production capacity, or supply buffer, which is dangerously thin at around 1 percent above the global demand of 82 million barrels daily.
"The fact is the market can't afford to have too many supply cuts. That's driving the prices high even though theoretically there is no shortage," said Victor Shum, an oil analyst for Texas-headquartered energy consultancy Purvin & Gertz in Singapore.
In a sign that high energy prices are beginning to rattle the global economy, Japan's fiscal policy minister Heizo Takenaka said the record run in oil prices threatened to derail the country's recovery and he made a plea for worldwide conservation.
"I think it's important that Japan do its utmost to conserve energy and that oil-consuming countries cooperate" to boost energy efficiency to ease price strains, Takenaka said.
RSS