Oil price update - Sept 18

zoom

(Getty Images)

Oil jumped to a record high above $81 a barrel on Tuesday, drawing strength from concerns of a winter supply squeeze in the world's top consumer, where an anticipated interest rate cut is calming recession fears.

US light crude for October delivery rose 49 cents to $81.06 a barrel by 0710 GMT after touching a record-peak of $81.24 and following a $1.47 jump on Monday.

London Brent crude for November rose 27 cents to $77.25 a barrel.

"The market developed a momentum of its own when price movement coincided with tightness in the market," said David Moore, commodities strategist Commonwealth Bank of Australia.

"In such a tight market there is potential for it to go up quite sharply without any major new news, but I actually expect some profit-taking at these levels to around $80," he added.

The US Federal Reserve looked set to trim rates by at least 25 basis points on Tuesday to keep a credit crunch from pulling the economy into a recession, which analysts have feared could hamper oil demand.

Hurricane and other supply risks, together with falling US inventories and fund flows into energy from poorly performing equity markets, have fuelled the recent hike in oil prices, which have climbed 33% this year.

Goldman Sachs on Monday forecast US oil prices would surge to $85 a barrel by the end of the year, up $13 from its previous forecast, and said crude could climb as high as $90 due to tight supplies.

Goldman Sachs called last week's decision by the Organization of Petroleum Exporting Countries to raise output by 500,000 barrels per day (bpd) from November 1 "too little, too late".

US crude oil supplies probably dropped for the fourth week in a row last week as imports shrank further, said industry analysts polled by Reuters ahead of Wednesday's government data.

Forecasts called for a 2 million-barrel draw in crude stocks, a 500,000-barrel decline in gasoline stocks and a 1.2 million-barrel build in distillates, which include heating oil, ahead of peak winter heating demand in the northern hemisphere.

Though oil prices have quadrupled since 2002, when adjusted for inflation the price is below the $90-peaks of the Iranian Revolution in 1979.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM