Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200806/20080627/article_364773.htm
Oil prices above US$140 as OPEC president says prices could pass US$150
Created: 2008-6-27 8:19:45
CRUDE oil futures shot above US$140 yesterday after OPEC's president said crude prices could rise well above US$150 a barrel this year and Libya said it may cut oil production.
Light, sweet crude crossed the US$140 level minutes before the New York Mercantile Exchange closed Thursday, then retreated slightly to settle up US$5.09 at a record US$139.64. In after-hours electronic trading, prices rose as high as a record US$140.39.
In London, August Brent crude futures rose US$5.50 to settle at US$139.83 on the ICE Futures Exchange.
Oil's latest milestone came as Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, said he believes oil prices could rise to between US$150 and US$170 a barrel this summer. Khelil also said prices will decline later in the year, and aren't likely to reach US$200 a barrel.
Khelil joins a long list of forecasters who have made bold oil price predictions this year. Each new forecast, such as Goldman Sachs' recent prediction that prices could rise as high as US$200,causes a jump in prices as speculative buyers are drawn into the market.
Meanwhile, the head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
"Shokri Ghanem, the nation's top oil official, declined to say when a decision would be made on whether to lower production, or give any indication of the size of the cut under consideration," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, in a research note.
Oil's move above US$140 a barrel was the first for what's known as a front-month crude contract, or the contract with the earliest expiration date. But it was not the August contract's first foray above US$140, August crude futures rose as high as US$140.42 a barrel while July futures were still traded as the front-month crude contract. Many other later contracts have also traded above US$140.
The previous trading record for a front-month contract was US$139.89, set by the July contract on June 16.
Oil prices have more than doubled over the past year on concerns about rising demand in fast-growing economies such as China and India, and supply disruptions in the Middle East and Nigeria. The dollar's protracted decline against the euro has also been a major factor behind oil's rise, as many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Analysts have also attributed oil's rapid climb to speculative buying, with traders jumping into the market purely on the expectation that futures will continue to rise.
Oil's record surge came late in the day on no new news, analysts said, suggesting late-session position squaring by investors.
"A lot of volume comes in the last 45 minutes (of trading)," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
Oil futures were also rising as investors reassessed comments the Federal Reserve made Wednesday when it held a key interest rate unchanged. Many investors who had expected the Fed to raise interest rates in August now think a rate hike is unlikely until after the November election or next year, said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
"Right now, the market's viewing the Fed as powerless," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Interest rates affect the dollar; many analysts believe the Fed's rate cutting campaign, which began last September, had much to do with weakening the dollar against the euro and sending oil prices skyrocketing. The dollar slid against the euro after the Fed's comments Wednesday, and was down again on Thursday.
In other Nymex trading yesterday, July gasoline futures rose 11.72 cents to settle at US$3.5113 a gallon and July heating oil futures rose 13.42 cents to settle at US$3.8834 a gallon. The expiring July natural gas futures rose 35.2 cents to settle at US$13.105 per 1,000 cubic feet. Trading in expiring contracts is often volatile.
Light, sweet crude crossed the US$140 level minutes before the New York Mercantile Exchange closed Thursday, then retreated slightly to settle up US$5.09 at a record US$139.64. In after-hours electronic trading, prices rose as high as a record US$140.39.
In London, August Brent crude futures rose US$5.50 to settle at US$139.83 on the ICE Futures Exchange.
Oil's latest milestone came as Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, said he believes oil prices could rise to between US$150 and US$170 a barrel this summer. Khelil also said prices will decline later in the year, and aren't likely to reach US$200 a barrel.
Khelil joins a long list of forecasters who have made bold oil price predictions this year. Each new forecast, such as Goldman Sachs' recent prediction that prices could rise as high as US$200,causes a jump in prices as speculative buyers are drawn into the market.
Meanwhile, the head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
"Shokri Ghanem, the nation's top oil official, declined to say when a decision would be made on whether to lower production, or give any indication of the size of the cut under consideration," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, in a research note.
Oil's move above US$140 a barrel was the first for what's known as a front-month crude contract, or the contract with the earliest expiration date. But it was not the August contract's first foray above US$140, August crude futures rose as high as US$140.42 a barrel while July futures were still traded as the front-month crude contract. Many other later contracts have also traded above US$140.
The previous trading record for a front-month contract was US$139.89, set by the July contract on June 16.
Oil prices have more than doubled over the past year on concerns about rising demand in fast-growing economies such as China and India, and supply disruptions in the Middle East and Nigeria. The dollar's protracted decline against the euro has also been a major factor behind oil's rise, as many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Analysts have also attributed oil's rapid climb to speculative buying, with traders jumping into the market purely on the expectation that futures will continue to rise.
Oil's record surge came late in the day on no new news, analysts said, suggesting late-session position squaring by investors.
"A lot of volume comes in the last 45 minutes (of trading)," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
Oil futures were also rising as investors reassessed comments the Federal Reserve made Wednesday when it held a key interest rate unchanged. Many investors who had expected the Fed to raise interest rates in August now think a rate hike is unlikely until after the November election or next year, said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
"Right now, the market's viewing the Fed as powerless," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Interest rates affect the dollar; many analysts believe the Fed's rate cutting campaign, which began last September, had much to do with weakening the dollar against the euro and sending oil prices skyrocketing. The dollar slid against the euro after the Fed's comments Wednesday, and was down again on Thursday.
In other Nymex trading yesterday, July gasoline futures rose 11.72 cents to settle at US$3.5113 a gallon and July heating oil futures rose 13.42 cents to settle at US$3.8834 a gallon. The expiring July natural gas futures rose 35.2 cents to settle at US$13.105 per 1,000 cubic feet. Trading in expiring contracts is often volatile.
Agencies
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