Oil futures contracts to 2016 soar above $100

SOARING PRICES: Oil futures contracts for delivery up to 2016 have risen above $100 for the first time ever. (Getty Images)

Airlines, utilities and other industrial oil consumers in the Middle East are likely to feel the pinch of higher crude prices over the next decade, with all crude futures contracts for delivery until 2016 soaring above the $100 mark for the first time ever.

Tightening supply chains, concerns about the health of the US dollar, geopolitical instability and the increased reliance of Opec members on high oil prices prompted investors to bid up the price of futures contracts to record highs in last week’s trading.

All futures contracts on the New York Mercantile Exchange (Nymex) breached the $100 mark for crude delivery up until 2016 on Friday with the Nymex December 2016 future contract settling at $103.59 a barrel at the close of trading.

Large industries typically buy long-dated contracts of resources they are largely dependent on to lock their costs in and shelter their business from unexpected price hikes.

A rise in long-dated futures prices means industrial consumers will find it increasingly difficult to hedge against higher costs over the long-term.

The trend over the last six months has seen long-dated oil futures outperforming spot prices considerably.

Since September, the five-year forward price has risen 45.3%, while the spot price has risen by 38.1%.

Crude for April delivery rose 95 cents to a new record above $111 a barrel on Monday, responding to a surprise weekend rate cut by US Federal Reserve and the emergency sale of stricken US investment bank Bear Stearns.

The dollar, in which crude is almost universally priced, fell to fresh lows against both the euro and the yen in early trading on Monday.

The International Energy Agency (IEA) warned last week the era of cheap oil had ended, adding that only a severe world recession would send oil back below $60 a barrel for a sustained period.

Oil has climbed from below $20 in early 2002.

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