Record-breaking oil prices paused yesterday after spiking near US$120 per barrel, as international concern mounted and the world’s top producer appealed for calm over soaring energy costs.
New York’s main oil futures contract, light sweet crude for delivery next month, added US$0.04 to US$118.11 a barrel. The contract for this month had struck a record high US$119.90 before expiring on Tuesday.
London’s Brent North Sea crude for delivery next month firmed US$0.07 to US$116.02 yesterday, after hitting a lifetime peak of US$116.75 on Tuesday.
Prices soared to historic heights on Tuesday as an attack on crude pipelines in Nigeria further tightened global energy supplies, which are under intense pressure with crude cartel OPEC refusing to raise short-term output.
Additional support came from the weak US currency, which makes dollar-priced oil cheaper for foreign buyers and stimulates demand. The euro surged past US$1.60 for the first time on Tuesday.
“Market sentiment is bullish in the immediate term,” said Victor Shum, senior principal of Purvin and Gertz energy consultancy in Singapore.
“The weak US dollar, real supply disruption in Nigeria ... are pushing prices higher,” he said.
Traders were expected to focus on the latest weekly report on US energy stockpiles later yesterday. The release is a focal point because the US is the biggest energy consumer in the world, followed by China.
News of falling US energy inventories could send prices beyond the psychological barrier of US$120, traders said.
However, Shum added that there was increasing concern that the current price rally “has been too much and too fast.”
Ministers from 74 countries, meeting in Rome on Tuesday at the International Energy Forum said prices should be at acceptable levels for producers and consumers to ensure global economic growth, particularly in developing countries.
US President George W. Bush also expressed concern at the impact of high price levels on consumers.
Saudi Arabian Petroleum Minister Ali al-Naimi on Tuesday urged calm in the face of runaway oil prices, adding that the world was not running out of crude.
The root of the problem was “limited capacity along the entire supply chain .... at its heart, this is not an energy resource issue; it is primarily an investment issue,” he said at the Rome forum.
Saudi Arabia is the biggest producer in the OPEC, which on Tuesday said that it planned to increase its production capacity by 5 million barrels per day (bpd) by 2012.
The cartel’s secretary general Abdalla Salem El-Badri said OPEC aimed to boost production capacity by 9 million bpd by 2020. Current OPEC output stands at about 32 million bpd.
Global supply worries were stoked after Anglo-Dutch oil group Royal Dutch Shell reported an output loss of 169,000 bpd from sabotage of its key pipelines in southern Nigeria.
Shell said on Monday it might not be able to honor oil contracts this and next month after the attacks.
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