Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200807/20080711/article_366433.htm
Crude oil prices rebound from recent drop
Created: 2008-7-11 8:17:56
OIL prices rebounded by more than US$5 a barrel yesterday, as another missile launch by Iran stoked worries that escalating political tensions in the Middle East could cut off supplies out of the region.
A day after Iran tested a missile capable of reaching Israel, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies. Iran then responded with another missile launch.
The mounting hostilities drew buyers back into the jittery energy markets, said John Kilduff, senior vice president of risk management at MF Global LLC.
"We fell awfully fast, awfully far," Kilduff said, "and these Iranian tensions are putting a higher and higher floor under this market."
After falling by nearly US$10 a barrel on Monday and Tuesday, light, sweet crude for August delivery soared US$5.60 to US$141.65 a barrel on the New York Mercantile Exchange. It was crude's largest daily leap since June 6, when the July contract jumped by US$10.75 a barrel.
On Wednesday, oil prices had seesawed before settling a penny higher at US$136.05, ending two days of sharp declines that left prices well below last Thursday's record trading high of US$145.85 a barrel.
In London, Brent crude on ICE futures exchange rose US$5.45 to US$142.03 a barrel.
OPEC's secretary general said Thursday that the oil producing group will not be able to replace any shortfalls if Iran is attacked and takes its crude supplies off the market. The fear is that Iran could block the Strait of Hormuz, a passageway that handles about 40 percent of the world's tanker traffic.
Meanwhile, attacks on Nigerian oil facilities could again disrupt supplies in that oil-rich region. Yesterday, Nigeria's main militant group vowed to resume attacks because of Britain's recent pledge to back the government in the conflict there. Attacks by the Movement for the Emancipation of the Niger Delta over the past two years have already slashed the country's normal daily oil output by a quarter.
Crude has reached a confounding point in its multi-year surge.
Supply worries certainly abound, and the value of the US dollar, a major factor in oil's trek upward, remains weak against other currencies. But while investors don't want to lose out on another price increase, they are also seeing reasons, most notably, the flagging US economy, to believe that oil might be peaking.
"Here in the United States, airplanes are being grounded. Travel has definitely changed. People are looking at hybrids," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
"It's been about a three- or four-year bull market, and anyone who has called a peak in this market has ended up with a red face," he said. However, "it appears that demand destruction is at a level where we might have seen the high in oil prices."
The International Energy Agency yesterday raised its forecast slightly for global oil demand this year to 1 percent growth from 0.9 percent growth. But the Paris-based watchdog said that demand growth in developing countries is offsetting contracting demand in developed countries.
"The contraction in demand is expected to be particularly marked in North America, given the weakness of the US economy and high oil prices," the IEA said.
Heating oil and diesel fuel prices, in particularly, have been rising due to increased demand in emerging markets. On the Nymex yesterday, heating oil futures rose 18.58 cents to settle at US$4.0374 a gallon.
High pump prices for gasoline, however, have been taking their toll on US consumers. The Energy Department reported Wednesday that US demand for gasoline over the four weeks that ended July 4 was 2.1 percent lower than a year earlier, at about 9.3 million barrels a day.
"I don't think we're going to imminently fall out of bed here," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos., referring to crude-oil prices. "But I'm finding it difficult to justify prices at much higher levels."
On the Nymex, gasoline futures added 13.01 cents to settle at US$3.5109 a gallon.
Natural gas futures on the Nymex rose by 29.4 cents to settle at US$12.30 per 1,000 cubic feet. The Energy Department said Thursday that natural gas stored in the US increased last week but remains 3.1 percent below the five-year average for this time of year.
A day after Iran tested a missile capable of reaching Israel, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies. Iran then responded with another missile launch.
The mounting hostilities drew buyers back into the jittery energy markets, said John Kilduff, senior vice president of risk management at MF Global LLC.
"We fell awfully fast, awfully far," Kilduff said, "and these Iranian tensions are putting a higher and higher floor under this market."
After falling by nearly US$10 a barrel on Monday and Tuesday, light, sweet crude for August delivery soared US$5.60 to US$141.65 a barrel on the New York Mercantile Exchange. It was crude's largest daily leap since June 6, when the July contract jumped by US$10.75 a barrel.
On Wednesday, oil prices had seesawed before settling a penny higher at US$136.05, ending two days of sharp declines that left prices well below last Thursday's record trading high of US$145.85 a barrel.
In London, Brent crude on ICE futures exchange rose US$5.45 to US$142.03 a barrel.
OPEC's secretary general said Thursday that the oil producing group will not be able to replace any shortfalls if Iran is attacked and takes its crude supplies off the market. The fear is that Iran could block the Strait of Hormuz, a passageway that handles about 40 percent of the world's tanker traffic.
Meanwhile, attacks on Nigerian oil facilities could again disrupt supplies in that oil-rich region. Yesterday, Nigeria's main militant group vowed to resume attacks because of Britain's recent pledge to back the government in the conflict there. Attacks by the Movement for the Emancipation of the Niger Delta over the past two years have already slashed the country's normal daily oil output by a quarter.
Crude has reached a confounding point in its multi-year surge.
Supply worries certainly abound, and the value of the US dollar, a major factor in oil's trek upward, remains weak against other currencies. But while investors don't want to lose out on another price increase, they are also seeing reasons, most notably, the flagging US economy, to believe that oil might be peaking.
"Here in the United States, airplanes are being grounded. Travel has definitely changed. People are looking at hybrids," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
"It's been about a three- or four-year bull market, and anyone who has called a peak in this market has ended up with a red face," he said. However, "it appears that demand destruction is at a level where we might have seen the high in oil prices."
The International Energy Agency yesterday raised its forecast slightly for global oil demand this year to 1 percent growth from 0.9 percent growth. But the Paris-based watchdog said that demand growth in developing countries is offsetting contracting demand in developed countries.
"The contraction in demand is expected to be particularly marked in North America, given the weakness of the US economy and high oil prices," the IEA said.
Heating oil and diesel fuel prices, in particularly, have been rising due to increased demand in emerging markets. On the Nymex yesterday, heating oil futures rose 18.58 cents to settle at US$4.0374 a gallon.
High pump prices for gasoline, however, have been taking their toll on US consumers. The Energy Department reported Wednesday that US demand for gasoline over the four weeks that ended July 4 was 2.1 percent lower than a year earlier, at about 9.3 million barrels a day.
"I don't think we're going to imminently fall out of bed here," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos., referring to crude-oil prices. "But I'm finding it difficult to justify prices at much higher levels."
On the Nymex, gasoline futures added 13.01 cents to settle at US$3.5109 a gallon.
Natural gas futures on the Nymex rose by 29.4 cents to settle at US$12.30 per 1,000 cubic feet. The Energy Department said Thursday that natural gas stored in the US increased last week but remains 3.1 percent below the five-year average for this time of year.
Agencies
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