Oil futures prices surged to new heights above US$55 a barrel on Friday as concerns about the global supply of heating oil persist ahead of winter in the Northern Hemisphere.
Crude for December delivery climbed US$0.70 to settle at US$55.17 per barrel on the New York Mercantile Exchange, surpassing the previous record close of US$54.93. Heating oil futures rose US$0.0149 to an unprecedented US$1.5944 per gallon.
The rally in heating oil has also spilled over into natural gas futures, which soared US$0.408 on Friday to settle at US$8.105 per 1,000 cubic feet. Natural gas futures are now about 67 percent higher than a year ago, even though analysts agree that supplies of this mostly-domestic fuel are ample.
"The primary concern now is the heating oil inventory level in the US," said Victor Shum, an analyst at Texas-based energy consultants Purvin & Gertz.
On Wednesday, the Energy Department reported that US inventories of distillate fuel, which include heating oil and diesel, shrank for the fifth consecutive week, leaving supplies nearly 10 percent below levels a year ago.
Fears of a cold Northern Hemisphere winter have further stoked the price of heating oil, as dwindling stocks have also been reported in Western Europe and Japan.
Demand for jet fuel -- kerosene and additives -- also typically rises during the Christmas season because of extra flights, adding even more pressure.
"Production of heating oil has to ramp up fast as there is a lot of catching up to do," Shum said.
Yet some analysts believe heating-oil supply fears have been somewhat overblown.
Inventories are "not catastrophically low by any means," said Andrew Lebow, senior vice president at Man Financial, a New York-based brokerage.
"The market has been so wracked with anxiety by it. It's really difficult to explain," he added. "What could be problematic for the market is if it's an early cold, if November ends up being cold."
Also Friday, December Brent crude futures on London's International Petroleum Exchange traded at US$51.22 per barrel, up US$0.50.
While crude futures prices are more than 80 percent higher than a year ago, they still need to reach US$80 per barrel to surpass the all-time peak -- in inflation-adjusted terms -- set in February 1981.
Still, disruptions in production and turmoil in key producers Iraq, Venezuela, Nigeria and Russia continue to haunt the market.
The world's available production capacity is just slightly above 1 percent of the daily diet of 82.4 million barrels, leaving little wiggle room in the event of a supply disruption.
"Geopolitical tensions have eased ... but they are certainly in the background, and the fact that we have a slim supply buffer is always a problem," Shum said.
Oil prices have gone up more than US$10 a barrel since mid-September because of production snags in the Gulf of Mexico, where more than 23 million barrels have been lost since Hurricane Ivan hit.
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