Crude oil prices climbed above the key US$50 mark in Asian trade yesterday, and crept close to their all-time high as worries continued over supply and unrest in key producing nations.
After settling at US$49.91 in New York, crude for November delivery shot up again in after-hours trade on the New York Mercantile Exchange to reach US$50.28 at midmorning in Asia and remained above US$50 through the afternoon.
Crude reached an all-time high of US$50.47 on Sept. 28 and analysts say prices are likely to remain in that range over the next few months.
"Prices will remain strong because of global strong de-mand. On a daily basis because of the various reports of supply disruption, prices will stay in a high band," said Victor Shum, an oil analyst at Texas-based energy consultants Pervin & Gertz in Singapore.
"We should get used to seeing this sort of pricing; there are no signals that demand is going to be significantly pulled back," he said, especially with the Northern Hemisphere's winter months approaching.
The supply of distillate fuel, which includes heating oil and jet fuel, is also tight, raising some concerns among traders.
Other analysts agree that prices should remain in the US$40 to US$50 bandwidth for the near future.
Oil prices are more than 60 percent higher than a year ago, but when adjusted for inflation they still remain around US$30 below the price levels reached in 1981.
The market remains edgy over Nigeria, where on-again, off-again talks between rebels and the government plague production in the Niger Delta, which churns out over 2 million barrels per day and is America's fifth-largest source of crude.
Also of concern is daily output in the Gulf of Mexico, which stands at around 28 percent below normal at roughly 1.2 million barrels, according to the federal Minerals Management Service. More than 13 million barrels of oil production have been lost since Sept. 13, when Hurricane Ivan swept through the US and the Caribbean, killing 115 and forcing oil companies to halt production.
A number of oil platforms were damaged and undersea inspections are being held up, further adding to delays in the Gulf of Mexico and Caribbean.
America is the world's biggest consumer of oil, taking about 25 percent of global supply.
But a lingering and larger worry among analysts is the amount of excess capacity, or supply buffer, which currently hovers around 1 percent above daily global consumption of 82 million barrels per day.
"If we get hit with a cold winter, supplies could get very tight," said Phil Flynn, an analyst at Alaron Trading Corp in Chicago.
Any prolonged supply interruption will push prices up, and such fears are one reason why prices have been inching up in recent months.
Other factors weighing into the spike include frequent attacks on pipelines by Iraqi insurgents, a presidential referendum in Venezuela and fears over Russian supplies after oil giant Yukos warned that output might suffer due to a multibillion dollar back-tax bill.
"Every day, it is either Nigeria, Iraq or Russia, or the weather, so there is something ... where there is a confluence of events, then prices should go even beyond US$50," Shum said.
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