Oil hits $60 a barrel
Crude futures on Friday looked set to repeat the sprint in overnight trading towards $60 a barrel, briefly touching the psychologically important mark in Asia as prices climbed steadily on speculative buying and fears of supply disruptions due to refinery glitches.
Midmorning in Singapore, light, sweet crude for the August contract on the New York Mercantile Exchange was up 37
cents to $59.79 a barrel in electronic trading after hitting the $60 mark for the second time within hours.
Oil prices briefly hit a record of $60 a barrel on the Nymex in overnight floor trade amid a flurry of buying, then retreated to settle at $59.42, a gain of $1.33.
It was a record close on the New York Mercantile Exchange,
where oil futures have been traded since 1983.
Heating oil rose a tad to $1.684 a gallon (3.8 litres) while petrol rose marginally to $1.663 a gallon.
Oil prices are nearly 60% higher than a year ago, but still below the inflation-adjusted high of more than $90 a barrel set in 1980.
Reasons
Analysts said the bullish momentum was supported mainly by talk of several minor refinery snags in California, including a cracker outage at Shell’s Martinez plant, fuelling fears of supply disruptions at the start of the high-demand summer driving season in the United States.
Any glitch in the aging US refining system puts more strain on the global supply chain because its refining capacity is running at maximum levels, making the world’s largest energy consumer reliant on imports of petrol.
Also, there is little excess production capacity to buffer the market from any prolonged output disruption. Excess production capacity is estimated to be only about 1.5 million
barrels a day.
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“The speculators who have put pressure on prices on the Daniel Hynes, energy analyst at ANZ Bank in Melbourne, Australia |
As global demand stays strong, and populous countries such
as China and India increase their consumption of energy, there are fears the producers will not be able to meet escalating demand as the second half of 2005 kicks in.
Still, with all these factors in the mix, analysts said the market was less affected by any significant loss of supply or sign of a demand surge than it was by speculation.
“The speculators who have put pressure on prices on the
backs of the Nigerian unrest have now moved back into the market and are pushing hard toward the $60 mark,” said energy analyst Daniel Hynes at ANZ Bank in Melbourne, Australia.
An ethnic organisation in southern Nigeria has warned of a
three-day protest in the next two weeks, demanding a
greater share of oil wealth for producing regions and
warned oil companies they should shut down during the
rally. Nigeria is the fifth-largest source of US crude.