Oil high of $100 could be broken after US Department of Energy report
Written by admin on January 3rd, 2008 in Trading, World Markets.
Oil this week traded at the $100 barrel barrier for the first time on Wednesday, marking an important market milestone.
Spurred on by recent unrest in Nigeria, Algeria and Pakistan, coupled with a weakening US dollar and cold weather warnings, the record high price of oil is wake up call of things to come in the New Year.
On Wednesday it was light sweet crude rose $4.02 to $100 a barrel in New York, prompting a drop in shares and a surge in gold prices.
On the back of the price rises the UK saw record petrol prices at the pumps at an average high of 103.3p, beating the previous high of 102.92p set on Boxing Day.
After Wednesdays $100 high, oil prices did ease today dipping to 99.61 dollars per barrel.
The oil high comes at a time when many central banks are trying to cut interest rates in order to stimulate growth, and with this new high there are increasing concerns that rising oil prices will stoke inflation. Increased inflation brought about by increasing oil prices will result in central banks being unable to make the necessary rate cuts to boost flagging economies, bringing the threat of recession closer.
Market experts have said that continuing demand for oil without an increased supply will only see this price increase further adding to the woes of oil producing economies.
The oil-producers’ cartel OPEC has blamed speculators for the high price of crude, stating that there is plenty of the fuel in the market to meet the demand of consumers.
Oil traders are due to meet OPEC in Vienna on February 1st, but after rejecting proposals for any increase in production in December blaming rising oil prices on industry speculators, any rise in production looks an unlikely solution.
Although unrest in oil producing countries is certainly playing a significant role in the rising cost of oil, some market analysts have also identified increasing demand from China and India as a significant factor.
Oil prices however also continue to get support from a weakening dollar, and additional fears remain ahead of the US Department of Energy’s weekly report on energy stockpiles due today. If the report confirms a seventh consecutive weekly fall in crude oil reserves, oil prices could well break Wednesdays $100 per barrel high.
Last week ending December 21, the US Department of Energy reported crude oil fell 3.3 million to 293.6 million barrels of reserve crude oil, a sixth consecutive fall.
Over the past five years crude prices have quadrupled, and after staving of the $100 per barrel mark in 2007, experts are already predicting a $120 per barrel high in 2008 and news of further falling stock piles later toady will certainly send prices closer to this figure.
