Oil hits new record, surges past $147
PABLO GORONDI
Friday, July 11, 2008
KUALA LUMPUR — Oil prices spiked Friday as continued tensions in the Middle East and concerns of renewed violence in Nigeria pushed the price for a barrel of oil to a record near $147 (U.S.).
By midday in Europe, light, sweet crude for August delivery jumped $5.25 to $146.90 on the New York Mercantile Exchange.
Oil prices had fallen $10 over two days to start the week and as oil rebounded Friday, Dow Jones industrial average futures fell more than 120 points.
In London, August Brent crude soared $4.92 to $146.95 a barrel on the ICE Futures exchange after hitting a record $147.25.
“There's always a fear premium in pricing. The tensions in Iran and the threat of supply disruption will help support oil prices,” said Jeff Brown, managing director of FACTS Global Energy in Singapore.
JBC Energy in Vienna, Austria, said the news about Iran, Nigeria, as well as a reported threat of a strike by oil workers in Brazil were “enough to wake the market from its two-day slumber.”
A day after Iran tested a missile capable of reaching Israel, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies. Iran then responded with another missile launch, drawing buyers back to jittery energy markets.
Both the U.S. and Israel have not ruled out a military strike on Iran.
Domestically, there was another disappointing report on U.S. stocks.
Heating oil futures on Friday rose to a record $4.15 in other Nymex trading, adding more than 11 cents a gallon.
The Organization of Petroleum Exporting Countries has warned that it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market. The fear is that Iran, OPEC's second-largest producer, could block the Strait of Hormuz, a passageway that handles about 40 per cent of the world's tanker traffic.
Meanwhile, attacks on Nigerian oil facilities could again disrupt supplies in the oil-rich region.
Nigeria's main militant group vowed Thursday to resume attacks because of Britain's recent pledge to back the government in the conflict there. Unrest during the past two years have already slashed the country's normal daily oil output by a quarter.
Still, while supply worries abound and the U.S. dollar remains weak compared with levels a year ago, many investors are seeing reasons to believe that oil might be peaking because of resistance to the record-level prices.
“Here in the United States, airplanes are being grounded. Travel has definitely changed. People are looking at hybrids,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
“It's been about a three- or four-year bull market, and anyone who has called a peak in this market has ended up with a red face,” he said. However, “it appears that demand destruction is at a level where we might have seen the high in oil prices.”
The U.S. Energy Department reported Wednesday that American demand for gasoline during the four weeks that ended July 4 was 2.1 per cent lower than a year earlier, at about 9.3 million barrels a day.
“I don't think we're going to imminently fall out of bed here,” said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. Inc., referring to crude-oil prices. “But I'm finding it difficult to justify prices at much higher levels.”
Natural gas futures rose 28 cents to $12.59 per 1,000 cubic feet.
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