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Crude oil prices surge to new high of US$44/barrel

Traders in crude oil futures work at the New York Mercantile Exchange on Monday. Crude prices are nearly 35 percent higher than they were a year ago. PHOTO: AP

US oil prices hit new record levels above US$44 a barrel yesterday after the head of OPEC said there was little the group could do to cool red-hot markets.

US light crude rose US$0.42 to US$44.24 a barrel, marking the highest level since crude futures were launched on the New York Mercantile Exchange in 1983. It later fell to trade around US$44.05.

London's Brent crude peaked at US$40.45 a barrel, its highest since the run-up to the first Gulf War.

Oil prices have surged by more than one-third since the end of last year on worries that accelerating global demand has left supplies tightly stretched with little leeway for disruption.

OPEC president Purnomo Yusgiantoro said yesterday that the cartel, which represents about 35 percent of the world's oil supply, had no spare oil to hand to dampen prices.

"The oil price is very high, it's crazy. There is no additional supply," Purnomo said in Jakarta.

"Minister Naimi has said Saudi Arabia can increase production but they cannot do it immediately," he said, referring to Ali al-Naimi, oil minister for Saudi Arabia, the world's No. 1 exporter.

Saudi Arabia has said it would produce 9.5 million barrels per day (bpd) this month, which would be just 1 million bpd below its full capacity. OPEC said last month that it would increase its surplus production capacity by a million barrels per day to 3.5 million in the short term.

Bailiffs have given Russia's largest oil company, Yukos, one month to pay back taxes, but the company said on Monday that the Tax Ministry had begun an investigation into its 2002 accounts.

Yukos owes almost US$7 billion in back taxes for 2000 and 2001 and analysts have said any bills for later years could bring the total towards US$10 billion.

It pumps one-fifth of production in Russia, the No.2 supplier after Saudi Arabia, but has had its bank accounts and assets frozen, raising fears that its sales may dry up at a time when global production is running close to full tilt.

"Stronger-than-expected demand has eaten into world spare capacity, which has been eaten into further by problems in Iraq. Now there is the uncertainty of Yukos," said David Thurtell, commodities strategist at Common-wealth Bank of Australia.

Industry estimates indicate that OPEC is pumping close to 30 million bpd of crude for the first time since 1979. The group, which raised its official production limits to 26 million bpd on Aug. 1, has been producing way over its self-imposed ceiling to try and dampen soaring prices.
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