New York oil price advances toward new record-high point


AFP

LONDON — The price of New York oil advanced Wednesday toward a new record high point above US$82 after striking an all-time pinnacle in the wake of Tuesday’s U.S. rate cut, analysts said.

Traders were also on tenterhooks before publication of the U.S. government’s weekly report on energy stockpiles.

On Tuesday, the Federal Reserve slashed U.S. interest rates by a half-point to 4.75 percent in a bid to boost the struggling American economy and ease the global credit squeeze. “Prices hit fresh all-time highs trading above US$82 per barrel just after the rate cut,” said Barclays Capital analyst Kevin Norrish, who also sounded a cautious note.

“Concerns about the U.S. economy and the implications for global growth have not yet receded and further volatility in commodity prices is very likely,” he added. For some time, oil market traders have been concerned that an economic slowdown in the United States — the world’s biggest energy consumer — would dampen crude demand and lead to lower prices.

In early morning deals on Wednesday, New York’s main futures contract, light sweet crude for delivery in October, surged as high as US$82.37 per barrel — which was a whisker away from Tuesday’s all-time record of US$82.38.

The contract later stood at US$82.20, up 69 cents from Tuesday.

In London on Wednesday, the price of Brent North Sea crude for November delivery jumped 51 cents to US$78.10 per barrel.

Brent had hit US$78.60 Tuesday — not far off its record high of US$78.64 that was struck in August 2006.

“Crude oil prices… rose in the wake of the Fed’s decision to cut rates by 50 basis points,” Australia’s Commonwealth Bank said in a market commentary.

“The rate cut is seen as reducing the risk of a severe slowing of the U.S. economy which may also have impacted on oil demand.”

In recent days, crude oil prices in New York have streaked to record highs on concerns about tight supplies and rising demand.

Traders are fearful of a supply crunch in the fourth quarter of 2007 as heating fuel demand hits a peak during the cold northern hemisphere winter months.

Later Wednesday, the U.S. Department of Energy was due to publish its report on American energy stockpiles in the week ending Sept. 14.

London analysts forecast that crude oil reserves will fall by about two million barrels, while gasoline or petrol inventories are expected to drop by one million barrels.

Most oil industry experts expect oil prices to remain high owing to a global supply-demand imbalance and geopolitical concerns surrounding OPEC powerhouse Iran.

Analysts at U.S. investment bank Goldman Sachs have said oil could soar as high as US$90 a barrel between now and the end of the year and could reach US$95 by the end of 2008.

However, others believe that oil prices could slip due to a possible slowdown in the world economy.

For Francis Perrin, editor of the journal Arab Oil and Gas, prices will likely remain above US$80 a barrel in the weeks ahead unless current financial market turbulence infects the broader global economy.

At Cambridge Energy Research Associates, Vera de Ladoucette has a more modest forecast, seeing the market stabilizing around US$75 a barrel in the fourth quarter.

Meanwhile, Societe Generale analyst Frederic Lassere foresees oil at US$70 a barrel at the end of 2007.

Industry analysts argue that a recent OPEC decision to boost output by 500,000 barrels a day was insufficient and came too late to meet rising winter related demand.