Oil hits record high despite supply boost

Posted by Super Admin
Tuesday, 17 June 2008

Price nears US$140 a barrel even as Saudis propose to lift output again next month

CRUDE oil rocketed to a record high of almost US$140 a barrel yesterday, despite news that Saudi Arabia is ready to raise output to help cool soaring energy costs for consumers.

New York’s main oil futures contract, light sweet crude for July delivery, reached US$139.89, beating its previous all-time high of US$139.12 recorded on June 6.

The contract later pulled back to stand at US$138.60, which was still a gain of US$3.74 from last Friday’s closing level.

The contract dropped nearly US$2 last Friday, when an industry newsletter reported that Saudi Arabia was poised for a big output boost.

‘The current proposed production increase is set to lift Saudi output to 9.7 million barrels per day in July, the highest monthly rate since August 1981, as reported by UN chief Ban Ki Moon over the weekend,’ said Mr Kevin Norrish, an oil analyst at Barclays Capital.

Prices leapt as the US dollar fell, after publication of data from the New York Federal Reserve that showed manufacturing in the state of New York contracted this month for the fourth time in five months.

‘Prices rose sharply in three minutes. US manufacturing data was weak, so it is pressuring the dollar,’ said Mr Mike Wittner, an energy analyst at Societe General.

The market was also digesting news of a partial halt to oil production in Norway – the world’s fifth biggest exporter of crude – after a fire had struck a North Sea platform on Sunday.

Mr Ban, the United Nations (UN) Secretary-General, has said Saudi Arabian Oil Minister Ali al-Nuaimi plans to raise his kingdom’s production by 200,000 barrels a day next month, on top of an increase of 300,000 barrels made this month.

‘They will respond positively whenever there is a request from their customers, so there is no shortage,’ Mr Ban said of Saudi Arabia, following a weekend visit to the oil-rich kingdom.

He added that ‘they don’t want to be blamed’ for high oil prices.

An official Saudi announcement could be made at a weekend summit of heads of state, oil ministers and business leaders to discuss oil price concerns. The summit scheduled for Sunday will be hosted by Saudi Arabia in Jeddah.

Oil prices broke through US$100 for the first time ever only at the start of this year and had commenced trading last year at about US$50.

Global finance officials fear high oil prices pose a threat to world economic growth, while truckers and others in Europe and Asia are holding protests over the rising cost of fuel.

World finance leaders who met in Japan over the weekend urged producing countries to hike output and invest money to ensure they can pump enough supply in future.



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