BANGKOK: Oil prices hit a new record above $135 a barrel and fell back slightly in Asia late Thursday, with supply worries, rising global demand and a slumping dollar keeping crude futures on an upward track.
With gas and oil prices setting new records nearly every day, many analysts are beginning to wonder what might stop prices from rising. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to crude s rally.
The sentiment in the market is very bullish at the moment, said David Moore, commodity strategist with the Commonwealth Bank of Australia in Sydney. The US dollar was weaker last night, and also the US EIA report showed an unexpected decline in U.S commercial crude oil inventories, so there s a combination of factors pushing the oil prices higher.
Crude prices blew past $130 on Wednesday amid concerns about demand, supplies and a weaker dollar, and then they just kept going. The rise accelerated when the US Energy Department s Energy Information Administration said US crude inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase.
Late afternoon in Singapore, light, sweet crude for July delivery was up $1.71 at $134.88 a barrel in electronic trade on the New York Mercantile Exchange.
The contract had earlier hit a trading record of $135.09 a barrel after rising $4.19 in the floor session Wednesday to settle at $133.17. The settlement price marked crude s largest one-day price advance since March 26.
Some analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.
Also, the Wall Street Journal reported Thursday that the Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world s top 400 oil fields.
For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently.
Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day in production over the next two decades, the paper reported.
That view has been echoed by many analysts watching the seeming unending string of oil price records.
The market is really structurally tight…oil demand is not growing that fast but supply is constrained, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
In its week report, the US Energy Information Administration said gasoline inventories also fell, which took the market by surprise as well. Inventories of distillates, which include heating oil and diesel fuel, rose less than analysts surveyed by Platts had expected.
In Asia, the dollar has gained slightly from overnight levels, but is still showing a downward bias that wasn t there last week.
Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.
Many investors believe the dollar s protracted decline over the past year has been the most significant factor behind oil s rise from about $66 a barrel a year ago.
And while Moore said his bank s expectation is that oil prices will ultimately fall back from current levels over the course of this year…the likelihood is that we ll have oil prices remaining at what would be considered a high level by the standards of a couple of years ago for some time yet.
In other Nymex trading, heating oil futures rose 8.2 cents to $3.9904 a gallon (3.8 liters) while gasoline prices added 3.92 cents to $3.4357 a gallon. Natural gas futures rose 9.3 cents to $11.733 per 1,000 cubic feet.
July Brent crude rose $2.25 to $134.95 a barrel on the ICE Futures exchange in London.
