Thursday, October 11, 2007

World oil prices spike

WORLD oil prices surged overnight close to recent record heights after news that American crude oil stockpiles fell heavily last week, traders said.

The price of London's Brent North Sea crude for November delivery soared $US1.88 to $US80.48 per barrel.

New York's main futures contract, light sweet crude for delivery in November, jumped $US2.05 to $US83.35 per barrel.

Last month, the price of Brent oil hit a record high $US81.05 per barrel, while New York crude struck an all-time peak of $US84.10 largely owing to tight energy supplies.

The US Department of Energy (DoE) said overnight that American crude oil reserves slumped by 1.7 million barrels in the week ending October 5.

That confounded analysts' consensus forecasts for a gain of 1.0 million barrels.

US distillates, which include heating fuel, slid by 600,000 barrels, which was broadly in line with market expectations for a 775,000-barrel drop.

Petrol reserves gained 1.7 million barrels last week but remain at historically low levels, analysts said.

"Looking at the bigger picture they (the US figures) do raise a lot of concerns about what's happening with the overall market," said Alaron Trading analyst Phil Flynn.

He said: "Gasoline (petrol) inventories are near historic lows, heating oil supplies are well below normal and crude supplies are dwindling."

The weekly DoE inventory report was delayed by one day owing to Tuesday's Columbus Day holiday in the United States.

The drop in stocks of distillates - refined from crude - was a concern for the oil market ahead of the peak demand season for heating fuel.

"The market's on edge," said Jason Feer, Asia Pacific vice-president of energy market analysts Argus Media.

"The only thing that can bail you out is a warm winter," he said.

Earlier overnight, the International Energy Agency (IEA), the developed world's energy watchdog, held steady its forecasts for oil demand for this year and next.

The IEA predicted average oil demand to be 85.9 million barrels per day in 2007 and 88 million bpd in 2008.

World oil supply increased by 415,000 bpd in September from August owing to higher output in North America, China and from OPEC members, averaging 85.1 million bpd, the watchdog said in its monthly report.

The IEA said that its forecasts for demand would be affected by assessments of the health of the global economy by the International Monetary Fund and the Organisation for Economic Cooperation and Development.

Recent turmoil in global financial markets and weakness in the US housing market has raised uncertainty about the outlook for growth.

Over the past year, the Brent price has surged by 30 per cent and New York crude has rocketed 40 per cent.

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