Oil Prices Briefly Rise Over $55 on Demand from US traders
From: Ase (Ase_at_eng.com)
Date: 03/10/05
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Date: Thu, 10 Mar 2005 04:02:50 GMT
Oil Prices Briefly Rise Above $55, Near Intraday Record on Strong Demand,
Cold Weather
Crude oil futures briefly rose above $55 a barrel Wednesday as traders
shrugged off evidence of rising oil supplies in the United States and
focused instead on strong demand, cold weather and the weak dollar.
Oil prices retreated toward the end of the day, though prices remain more
than 50 percent higher than a year ago.
On the New York Mercantile Exchange, light, sweet crude rose as high as
$55.65 per barrel -- just two cents short of the intraday record -- before
retreating to $54.65, a gain of 6 cents.
The highest Nymex settlement price on record was $55.17 per barrel, set
twice in late October, although prices would have to surpass $90 per barrel
to meet the inflation-adjusted peak set in 1980.
While analysts said the recent runup in oil prices has also been speculative
in nature, they conceded that prices were likely to remain high so long as
the economy continues to grow.
"There is no shortage anywhere," said James Cordier, president of Liberty
Trading Group in St. Petersburg, Fla.
Even the top executive of Exxon Mobil Corp., the world's largest oil
company, said 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.
Raymond said he believed 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. 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.
To that end, OPEC oil ministers have signaled they will not raise output at
their meeting next week -- a stance that analysts said was not surprising
considering the organization already is producing over its quota.
In the U.S. government's latest petroleum supply report, inventories of
crude oil rose, as expected, while supplies of gasoline and distillate fuel,
which includes heating oil, showed modest declines.
"Supplies in the U.S. are at very comfortable levels coming out of the
heating season and months before the driving season," Cordier said.
The rest of the market is apparently less comfortable.
Gasoline prices are also on the rise, with regular unleaded averaging $2 a
gallon nationwide, according to the Energy Department. While some Democrats
in Congress have called on President Bush to release oil from the nation's
emergency reserve to ease market conditions, the administration said
Wednesday it had no such plans.
"We do not believe it (the reserve) should be used to manipulate prices or
for political purposes," White House press secretary Scott McClellan told
reporters.
On bond markets Wednesday, 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.
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 U.S. dollars, and because the currency
has lost 8 percent of its value against the euro in the last four months,
OPEC nations have signaled support for higher oil prices as a hedge to
maintain their buying power in Europe.
Venezuela, Qatar and Algeria have all come out against raising output, and
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah of Kuwait said Sunday that
although prices were high, the market was well supplied.
The U.S. 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 percent above year ago levels.
The nation's inventory of gasoline declined by 200,000 barrels to 224.3
million barrels, or 11 percent above year ago levels, 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 percent below year ago
levels.
Associated Press Writers George Jahn in Vienna, Austria and Wee Sui Lee in
Singapore contributed to this report.
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