Oil futures touch US$60 in Asia

An Indonesian man and his dog ride a scooter pulling a barrel of oil on a street in Jakarta, Indonesia, yesterday. Crude oil futures briefly touched US$60 a barrel in Asian trading yesterday, hours after reaching the psychologically important mark in New York, as prices rose on speculative buying and fears of supply disruptions due to refinery glitches. PHOTO: AP

Crude oil futures briefly touched US$60 a barrel in Asian trading yesterday, hours after reaching the psychologically important mark in New York, as prices rose on speculative buying and fears of supply disruptions resulting from refinery glitches.

Midafternoon in Singapore, light, sweet crude for the August contract on the New York Mercantile Exchange was up US$0.29 to US$59.71 a barrel in electronic trading.

Oil prices briefly hit a record US$60 a barrel on the Nymex in overnight floor trading amid a flurry of buying, then retreated to settle at US$59.42, a gain of US$1.33. It was a record close on the New York Mercantile Exchange, where oil futures have been traded since 1983.

Oil prices are nearly 60 percent higher than a year ago, though still below the inflation-adjusted high above US$90 a barrel set in 1980.

Analysts said the bullish momentum was supported mainly by talk of several minor refinery snags in California, including a cracker outage at Shell's Martinez plant, fueling fears of supply disruptions at the start of the high-demand summer driving season.

"The rise has almost purely been built on supply disruption fears," said energy analyst Daniel Hynes at ANZ Bank in Melbourne.

Any glitch in the aging US refining system puts more strain on the global supply chain because its refining capacity is running at maximized levels, making the world's largest energy consumer reliant on imports of gasoline. The logjam in the production line is contributing to the build in petroleum products in the US, analysts say.

Also, there is little excess production capacity to buffer the market from any prolonged output disruption. Excess production capacity is estimated to be about 1.5 million barrels a day.

As global demand stays strong, and populous countries such as China and India increase their consumption of energy, there are fears the producers will not be able to meet escalating demand in the second half of this year.