Oil Tops $53 as Funds Increase Bets Demand Will Outpace Supply
Oil Tops $53 as Funds Increase Bets Demand Will Outpace Supply
March 3 (Bloomberg) -- Crude oil traded above $53 a barrel in New York for a second day on speculation surging demand will strain production capacity this year.
Investors are buying oil futures, betting that an expansion in output capacity may take years and come too late to prevent demand outpacing supply, said analysts including Tor Kartevold of Statoil ASA, Norway's largest oil company. Speculators last week made their biggest bets on higher oil prices in eight months, according to the Commodity Futures Trading Commission.
``They are painting a picture, not that we are running out of oil, but that we are running out of additional capacity to meet sustained demand growth in the next year,' Kartevold said from Stavanger, Norway. ``The jury is still out.'
Crude oil for April delivery fell 3 cents to $53.02 a barrel on the New York Mercantile Exchange at 9:25 a.m. London time, up 48 percent from a year ago. It earlier reached $53.20, the highest price since Oct. 27, two days after it touched a record of $55.67. Brent crude for April gained 7 cents to $51.29 on London's International Petroleum Exchange.
``High oil prices are here to stay,' said Puru Saxena, the president of Bridgewater Ltd. in Hong Kong, who manages about $130 million in Asian equities. ``Unless someone can find oil reserves and find it quick, oil prices will remain high.'
Getting Longer
Speculative long positions, or bets that prices will rise, outnumbered short positions by 54,176 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report on Feb. 25. Net-long positions rose for a third week, by 22,548 contracts, or 71 percent, from a week earlier. Net longs peaked at 82,451 contracts in March 2004.
``The funds are hoovering oil up,' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia in Sydney. ``They still think it and other commodities are a buy.'
Gasoline rose to a record yesterday on concern shutdowns at plants such as Lyondell-Citgo Refining LP's Houston facility may deepen production cuts.
``The refinery outage in Texas is making people think that while gasoline stocks are good, this refinery problem is a sign of things to come and maybe they won't be good for that much longer,' Thurtell said.
Gasoline for April delivery yesterday rose 8.11 cents, or 5.8 percent, to $1.4838 a gallon in New York, the highest close since the contract began trading in 1984 and 30 percent higher than a year ago. The contract reached an intraday high of $1.4850 in after-hours trading.
More Gasoline
U.S. gasoline stockpiles climbed 973,000 barrels to 224.5 million in the week ended Feb. 28, the energy department report showed. Gasoline supplies have risen 10.4 percent in the past year and are at their highest level since June 1999.
Inventories of distillate fuel, which includes heating oil and diesel, fell 1.7 million barrels to 110 million, the report showed. Analysts had expected a 1.2 million-barrel decline.
Investors are ``more comfortable' buying oil futures now that the weekly Energy Department report has been released, said Mike Armbruster, co-founder of Altavest Worldwide Trading Inc. in Laguna Hills, California.
``There's less risk of a nasty surprise one way or the other' now the report is out, he said. ``This is a very strong bull market and it's likely to go toward $60 before it slows down.'
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