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New York crued oil reaches new high

The price of New York crude oil hit a record high US$81.24 per barrel yesterday as traders fretted over energy supplies in the forthcoming winter season in the US.

New York's main futures contract, light sweet crude for delivery next month, forged the fresh all-time high in early deals.

The contract later pulled back slightly to stand at US$80.82, which marked a gain of US$0.25 from Monday's close.

In London yesterday, the price of Brent North Sea crude for November delivery rose US$0.12 to US$77.10 per barrel.

Last week, New York crude had smashed through US$80 per barrel for the first ever time as prices were also pressured by hurricane concerns over US energy facilities in the US Gulf of Mexico.

"The market developed a momentum of its own when price movement coincided with tightness in the market," said David Moore, a commodities strategist with Commonwealth Bank of Australia.

"In such a tight market there is potential for it to go up quite sharply without any major new news, but I actually expect some profit-taking at these levels to around US$80," he said.

The US Federal Reserve looked set to trim rates by at least 25 basis points yesterday to keep a credit crunch from pulling the economy into a recession.

"The market will be waiting to see how much the Fed cuts interest rates and whether its statement indicates that there may be further rate cuts or not, and those will affect perceptions of the US economy and the demand for oil," said David Moore, commodity strategist with the Commonwealth Bank of Australia in Sydney.

"The background picture is one of tight oil markets. Data from the US Energy Information Administration has shown declining oil inventories in recent weeks," Moore said.

Hurricane and other supply risks, together with falling US inventories and fund flows into energy from poorly performing equity markets, have fuelled the recent hike in oil prices, which have climbed 33 percent this year.

Goldman Sachs on Monday forecast US oil prices would surge to US$85 a barrel by the end of the year, up US$13 from its previous forecast. It said crude could climb to US$90 due to tight supplies.

Goldman Sachs called OPEC's decision last week to raise output by 500,000 barrels per day (bpd) from Nov. 1 "too little, too late."

US crude oil supplies probably dropped for the fourth week in a row last week as imports shrank further, said industry analysts polled ahead of today's government data.

Forecasts called for a 2 million-barrel draw in crude stocks, a 500,000-barrel decline in gasoline stocks and a 1.2 million-barrel build in distillates, which include heating oil, ahead of peak winter heating demand in the northern hemisphere. Though oil prices have quadrupled since 2002, when adjusted for inflation the price is below the US$90-peaks of the Iranian Revolution in 1979.
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