Crude oil prices top $55

Crude oil futures have risen above $55 a barrel as traders shrugged off evidence of rising supplies in the United States and focused on strong demand, cold weather and the weak dollar.

    Oil prices are more than 50% higher than a year ago

    Oil prices retreated at the end of the day on Wednesday, although prices remain more than 50% higher than a year ago.


    Light, sweet crude rose as high as $55.65 a barrel on the New York Mercantile Exchange - just two cents short of the intraday record - before slipping to settle at $54.77, a gain of 18 cents from Tuesday's close.


    The highest Nymex settlement price on record is $55.67 a barrel, set twice in late October, although prices would have to surpass $90 a barrel to meet the inflation-adjusted peak set in 1980.


    High prices


    While analysts said the recent rise in oil prices has been speculative, they conceded that prices were likely to remain high so long as the economy continued to grow.


    "We are in the mode where the fundamentals of supply and demand really don't drive the price"

    Lee Raymond, chairman and chief executive of Exxon Mobil

    "There is no shortage anywhere," said James Cordier, president of Liberty Trading Group in St Petersburg, Florida.


    Even the top executive of Exxon Mobil Corporation, the world's largest oil company, said on Wednesday that energy markets were red-hot beyond what supply and demand alone would dictate.


    "We are in the mode where the fundamentals of supply and demand really don't drive the price," Lee Raymond, the chairman and chief executive of Exxon Mobil, said during the company's annual analyst conference in New York.


    Political fear


    Raymond said he thought the main reason for the "risk premium" placed on oil prices these days was the market's fear of a terror attack or some other political action that would disrupt the global oil supply chain and cause a real shortage.


    Opec ministers have signalled
    they will not raise oil output

    This premium would be smaller, Raymond suggested, if not for the fact that producers are pumping just slightly more than the 84 million barrels a day the world is consuming.


    Opec oil ministers have signalled they will not raise output at their meeting next week, a stance that analysts said was not surprising considering the organisation already is producing over its quota.


    In the US government's latest petroleum supply report, inventories of crude oil rose, as expected, while supplies of petrol and distillate fuel, which includes heating oil, showed modest declines.


    "Supplies in the US are at very comfortable levels coming out of the heating season and months before the driving season," Cordier said.


    Petrol price rise


    Petrol prices are also on the rise, with regular unleaded averaging $2 a gallon (53 cents a litre) in the United States, according to the Energy Department.


    "We do not believe it (the reserve) should be used to manipulate prices or for political purposes


    Scott McClellan, White House spokesman

    While some Democrats in Congress have called on President George Bush to release oil from the nation's emergency reserve to ease market conditions, the administration said on Wednesday that it had no such plans.


    "We do not believe it (the reserve) should be used to manipulate prices or for political purposes," White House spokesman Scott McClellan said.


    On Wednesday's bond markets, the yield on 10-year Treasury notes rose as inflationary concerns grew. However, analysts said it was faster-than-expected economic growth underpinning those concerns, not high oil prices.


    "I just don't hear from anybody that high oil prices will derail economic expansion at this time," said Steve Stanley, the chief economist at RBS Greenwich Capital in Connecticut.


    Strong euro


    Also driving prices higher was the strong euro, which rose above $1.33, its highest level since early January.


    Because crude is sold worldwide in US dollars, and because the currency has lost 8% of its value against the euro in the past four months, Opec nations have signalled support for higher oil prices as a hedge to maintain their buying power in Europe.


    Al-Sabah(L) said the market
    was well supplied

    Venezuela, Qatar and Algeria have all come out against raising output, and Opec President Shaikh Ahmad Fahd al-Ahmad al-Sabah of Kuwait said on Sunday that although prices were high, the market was well supplied.


    The US Energy Department's weekly petroleum supply report showed inventories of crude oil rose last week by 3.2 million barrels to 302.6 million barrels, or 9% above levels a year ago.


    The US inventory of petrol declined by 200,000 barrels to 224.3 million barrels, or 11% above levels a year ago, the agency said.


    The supply of distillate fuel, which includes heating oil and diesel, shrank by 800,000 barrels to 109.2 million barrels, or 1% below levels a year ago.

    SOURCE: Agencies


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