LONDON: World oil prices rose yesterday in the face of robust demand from China and the US and at the end of a week when they reached $60 for the first time on supply concerns.
New York’s main contract, light sweet crude for delivery in August, advanced 18¢ to $59.60 per barrel in early deals.
The contract had hit $60 per barrel on Thursday, as speculators seized on supply concerns ahead of the northern hemisphere winter.
The historic level broke Tuesday’s record price of 59.70 dollars.
In London yesterday, the price of Brent North Sea crude oil for delivery in August gained 8¢ to $58.04 per barrel. It earlier reached 58.51 dollars, just shy of Monday’s record high of $58.58.
“The prices reflect the long term supply situation,” Monument analyst Stephen Lewis said. “Its a reflection of things to come” during the fourth quarter, he added.
Prices are hitting record peaks as speculators worry that refineries will struggle to turn enough crude oil into heating fuel to meet fourth-quarter demand. US refineries are currently operating at around 95% of capacity, mainly to meet demand for gasoline, or petrol.
“People are looking forward to the fourth quarter and thinking that supply really will be struggling to keep up with demand at that point,” Seymour Pierce analyst Richard Slape said.
“I can’t see any reason why prices should go back down substantially in the short term.”
The market has largely ignored Wednesday’s reassuring US crude inventories report and the end of a threatened strike by Norwegian oil workers this week, to focus on worries that global demand could outpace supply.
Underlining its voracious appetite for energy, China was to start filling its first strategic petroleum reserve this year as part of plans to ensure it has a supply of emergency oil, the Chinese state press reported yesterday.
The 16-tank facility in Zhenhai city in the eastern province of Zhejiang is meant to provide a cushion for China against possible interruptions of foreign supplies, the China Daily said on its website.
Similar to the US strategic reserve, Beijing aims to stockpile up to 100mn barrels of petroleum, equivalent to almost a month’s national consumption.
In Frankfurt, meanwhile, the governor of the Central Bank of the UAE said yesterday that oil prices at their current levels risk damaging global growth and harming the incomes of Gulf oil exporters over the medium term.
Sultan bin Nasser al-Suweidi said he did not expect oil prices to fall much over the rest of the year. He urged oil producers and consumers to agree a strategy to boost refinery and extraction capacity, saying persistently high oil prices would ultimately lead to reduced demand as the global economy slowed down.
“I don’t think it’s a good thing for the UAE. I don’t think it’s a good thing for the (Gulf) countries. I think it will stifle economic development that is going on in the world and will lessen current growth, and that is not good for our economies,” Suweidi said.
“That will affect negatively oil consumption and cause prices to go down in the medium term, like we have seen in the past,” added Suweidi, who was attending an Arab banking conference in Frankfurt.
While he did not want to give a forecast for oil prices at the end of 2005, Suweidi said: “I don’t think there will be a major reduction.”
Suweidi expects the UAE economy to continue to grow strongly this year while oil prices stay high. “I would expect not less than 10% economic growth – like China,” Suweidi said, adding that similar growth was possible in 2006 if oil prices remained supportive.
While the UAE has been one of the most successful Gulf states in diversifying its economy - Suweidi expects the non-oil sector to grow by 9% in 2005 - it is still heavily reliant on oil export revenue. – AFP, Reuters |
