Crude Oil Futures Prices Climb Further
LONDON – Crude oil futures prices rose further Wednesday, a day after closing at the highest level in the 21 years that such contracts have been traded in New York amid continuing concerns about threats to supplies from Iraq and Russia.
U.S. light crude for September delivery briefly hit an intraday high of $44.30 a barrel in electronic trading in advance of the opening of trading on the New York Mercantile Exchange. The price later fell to $44.28. The September contract settled Tuesday at $44.15, the highest close since such trading started on the Nymex in 1983.
On London’s International Petroleum Exchange, September Brent crude futures rose to $40.97, up 33 cents from Tuesday’s record settlement price of $40.64. The IPE launched Brent crude futures trading in 1988.
Oil prices have risen partly on concerns about the reliability of crude supplies from Iraq, where saboteurs have attacked pipelines and disrupted exports, and on fears of terrorist attacks in the United States. U.S. authorities warned Sunday that al-Qaida was planning attacks on five key financial institutions in New York, New Jersey and Washington.
Uncertainty about the fate of Russia’s largest oil company Yukos continued to unnerve markets. Russian tax authorities said Monday they would begin investigating the 2002 activities of Yukos, which produces 2 percent of the world’s crude.
Some analysts have forecast that the oil price could rise to $50 a barrel and that the Organization of Petroleum Exporting Countries will not be able to meet demand in the fourth quarter.
Oil analyst Richard Griffiths, at brokerage Williams de Broe, said such a rise was feasible, but only if there was a major disruption to oil supplies coupled with evidence of renewed strength in demand.
Griffiths said, however, that limits on output capacity for the world’s leading producers would probably keep oil prices would cool down significantly in the foreseeable future.
“I doubt there is a quick fix,” Griffiths said, adding that OPEC countries would need more investment and time to reach higher production levels.
John Vautrain, vice president of energy consultants Purvin & Gertz, agreed that prices could reach $50.
“If you want the prices to come down, there probably needs to be a reduction in the (terror) threats: let’s quiet down Iraq, let’s get Yukos settled,” Vautrain said in Singapore.
“Clearly the world is very nervous. Clearly, New York is very nervous over the variety of events in the past weeks,” he said. “Most of it is nerves and not an issue of supply.”
Although prices are high, they would have to climb to about $57 per barrel to exceed the value of oil leading up to the first Gulf War. On Oct. 11, 1990, oil was priced at $40.42 per barrel, which – taking inflation into account – would be equivalent to approximately $57 in today’s dollars.
On Tuesday, OPEC president Purnomo Yusgiantoro said the cartel could not immediately increase output to help bring prices down. But Dow Jones Newswires later quoted a senior Saudi source as saying Saudi Arabia had the capacity to “immediately” increase its oil output from 9.5 million barrels a day to 10.5 million barrels a day.
Traders say they are awaiting the U.S. Department of Energy’s weekly oil data report, due later Wednesday, for further clues on the short-term outlook.
One trader, speaking on condition of anonymity, said prices will cool once the “wave of Saudi crude” hits the market, which he said would happen soon.