Posted on 11/06/2007 1:43:06 PM PST by Red Badger
NEW YORK (AP) -- Oil futures jumped to a new record above $97 a barrel Tuesday after bombings in Afghanistan and an attack on a Yemeni oil pipeline compounded the supply concerns that have driven crude prices higher in recent weeks. Those concerns were also fed by a government prediction on Tuesday that domestic oil inventories will fall further this year while consumption rises.
At the pump, meanwhile, gas prices continued to rise, following oil's 39 percent price rally since August. The national average price of a gallon of gas jumped 2 cents overnight to $3.024 a gallon, according to AAA and the Oil Price Information Service.
Separately, the federal Energy Information Administration reported that diesel fuel prices reached a national average of $3.303 a gallon, a new record.
If oil prices continue to rise, it might be some time until consumers see relief at the pump. Some analysts predict prices could rise as high as $3.50 to $4 a gallon next summer.
The Energy Information Administration is predicting gas prices will remain above $2.90 a gallon for the rest of the year, and will set a new record national average of $3.235 a gallon by May. In May 2007, prices peaked at $3.227 a gallon as refiners, faced with a series of unexpected outages, struggled to produce enough gas to meet demand.
On Tuesday, oil was already up before news of the blasts in northern Afghanistan that killed 64 people and the attack in Yemen. Severe weather forecasts for the North Sea, expectations that domestic crude supplies fell last week and the weak dollar all contributed to the latest move upward.
While Afghanistan doesn't produce much oil, traders watch for the possibility that any escalation in the conflict there between U.S. armed forces and Islamic militants could spill over into other countries, disrupting oil supplies out of the Middle East.
John Kilduff, vice president of risk management at MF Global UK Ltd., noted that the attack in Yemen "has disrupted a pipeline that carries 155,000 barrels a day of crude."
Meanwhile, investors believe crude supplies are declining in the U.S. Analysts surveyed by Dow Jones Newswires predict, on average, that crude oil inventories fell by 1.6 million barrels last week. The EIA will issue its weekly inventory report on Wednesday. Oil futures' rise above $90 a barrel has been fueled in part by two weeks of unexpected declines in inventories.
On Tuesday, the EIA predicted oil consumption will rise in the fourth quarter and next year despite higher prices, and that inventories will fall.
"Strong demand, limited surplus capacity, falling inventories and geopolitical concerns continue to weigh on the market," the EIA said in its monthly Short-Term Energy Outlook.
The weak dollar, which fell to a new low against the euro Tuesday, is also lifting oil prices. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Light, sweet crude for December delivery rose $2.72 to settle at a record $96.70 a barrel on the New York Mercantile Exchange Tuesday after earlier rising as high as $97.10, a new trading record.
Oil prices settled 66 percent higher Tuesday than on Jan. 3, the first trading day of the year. But Tuesday's trading record of $97.10 a barrel is up 95 percent from this year's trading low of $49.90, set Jan. 18.
Other energy futures also rose Tuesday. December gasoline futures jumped 5.39 cents to settle at $2.435 a gallon on the Nymex, while December heating oil futures added 6.39 cents to settle at $2.6078 a gallon.
Natural gas for December delivery fell 13.6 cents to settle at $7.863 per 1,000 cubic feet on the Nymex on predictions for mild temperatures next week in the Midwest and Northeast, and expectations that inventories, already at record levels, will continue to rise.
In London, Brent crude rose $2.77 to settle at $93.26 a barrel on the ICE Futures exchange. A number of North Sea oil platforms were being evacuated Tuesday in advance of expected severe weather.
On Wednesday, analysts also expect the EIA to report that gasoline inventories rose by 200,000 barrels during the week ended Nov. 2, while supplies of distillates, which include heating oil and diesel fuel, fell by 500,000 barrels.
The analysts expect that refinery use grew by 0.8 percentage point to 87 percent of capacity.
Oil inventories likely fell due to a suspension of output at Mexico's state oil company Petroleos Mexicanos, a major crude exporter to the United States, which temporarily shut its ports last week due to severe weather.
"The oil market is really supported by the tight inventories in the U.S. market and the general expectations for the inventory report this week are that the crude inventories will likely fall," said Victor Shum of Purvin & Gertz Inc. in Singapore.
Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.
$3.15/gal here Monday. Probably $3.25 tomorrow. $3.50/gal by Thanksgiving.
Is that 'Oil Hits $97' on (i.e. because of) --- 'Bombs' and 'Demand forcast' with the comma or is it 'Oil Hits $97 on (news of) Bombs' ... Oil demands forcast ... Someone else demands a forecast ... whatever
Maybe they are trying to save money by using fewer 'words'
AP, go figure...........
The oil/gas inventory numbers tomorrow will probably show that the oil companies are importing and refining less product from OPEC, thus helping the speculators in the commodities pits to drive up the price. The numbers for gasoline and heating oil will probably show there is a plentiful supply available because US consumers are cutting back. The oil gougers are buying less oil but are still making billions on what they do buy...sweet.
How we ever got to this disgraceful point, letting our enemies control our fuel supply, boggles the mind. Oil has almost doubled in price since early summer. There is simply no reason but gouging for that.
$2.999 here at Sam’s, Ft. Walton Beach, FL.............
Thank you, America. </sarcasm> If it were not for the American populace's utter ignorance of the laws of economics we would not have this problem.
Thank the teachers in the schools for not educating the kids about economics and the history of our country. When this country decided to start buying Saudi oil, it was $5 a barrel.
Waaaaaaaaa!
Help Iran in its stalling and nuclear weapons building, and pay a little more. ...big deal. Oil will go a lot higher, after Iran has nuclear weapons.
All of the piggies in my area continue to drive long distances out of nothing more than boredom. They don’t even try to waddle around a little for their health. And there are junk food packages laying all over the landscape. ...consequences of the popularization of dual-earning families and lack of real parents.
“There is simply no reason but gouging for that.”
Gouging?
No...
Any crude futures traders here?
A lot of FReepers are crude........both now and in the future!.........
Oil production has been stagnant at ~84.5 million barrels per day +/-500,000 barrels per day since mid-2004.
Demand had been growing at 5% per year since 2002 coming out of the 9/11 recession.
Stagnant production in the face of growing demand = much higher prices on the margin.
And our consumption was may one fourth what it is now...........
Let’s not leave out our wonderful Congress critters.
A lot less than that. Saudi Arabia granted oil concessions to Standard of California in 1933.
And the rest of the world was practically non-existent as far as oil consumption was concerned.........
Lets sell Alaska to the Arabs so we can get more oil.
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