Oil continues march toward $100
Record high above $98 as expectations of tight inventories and pipeline attack in Yemen drive prices higher.
November 7 2007: 6:12 AM EST
SINGAPORE (AP) -- Oil prices jumped to a new trading record above $98 a barrel Wednesday amid expectations of declining U.S. supplies and following news of an attack on a Yemeni oil pipeline.
"The oil market sentiment remains bullish ... there is an overall upward trend toward the $100 level," said Victor Shum, energy analyst with Purvin & Gertz in Singapore. "Meanwhile, we can expect extreme volatility where on the one hand some traders will take profit while others will buy back positions."
Light, sweet crude for December delivery added $1.31 to $98.01 a barrel by late afternoon in Singapore, after rising as high as $98.62 a barrel - an all-time futures trading record - in Asian electronic trading on the New York Mercantile Exchange.
The contract hit a high of $97.10 Tuesday before settling at $96.70 a barrel, a record settlement 66 percent higher than the close on the first trading day of the year. Wednesday's trading record is 96.7 percent higher than this year's trading low of $49.90, set Jan. 18.
Traders remain worried about whether supplies will be adequate to meet demand for heating fuel in the approaching Northern Hemisphere winter. News of an attack Monday on an oil pipeline in Yemen added to those concerns.
Figures to be released later Wednesday by the Energy Department's Energy Information Administration are expected to show crude supplies dropped last week. Analysts surveyed by Dow Jones Newswires predict, on average, that crude oil inventories fell by 1.6 million barrels.
"The price rise is really driven by expectations of drawdowns in crude oil and distillate stocks inventories in the U.S. inventory report," said Shum. "Some cold weather reports out of the U.S. and Europe serve as a reminder that winter is coming and that there are still supply concerns."
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.
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 U.S. 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.
Analysts also expect the EIA to report Wednesday 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.
In London, Brent crude rose $1.36 to $94.62 a barrel on the ICE Futures exchange. A number of North Sea oil platforms were being evacuated Tuesday in advance of expected severe weather.
Heating oil futures added 2.62 cents to $2.6340 a gallon while gasoline prices rose 2.3 cents to $2.4580 a gallon.
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