Oil prices surged to an unprecedented high in late trading yesterday, settling above $100 a barrel and prompting a new round of concern about the effect of high fuel costs on the health of the global economy.
A rush of speculative buying pushed the price of crude up 5 per cent, on a heady cocktail of fear for supplies, belligerent noises from the Opec oil producing cartel, and the falling dollar. Analysts believe that Opec is unlikely to increase production to alleviate the upward pressure on prices when it meets on 5 March, despite recent overtures from Western leaders including US president George Bush.
"Opec should maintain production or cut production," Venezuela's oil minister Rafael Ramirez said yesterday, echoing comments made by Opec President Chakib Khelil on Monday.
Other cartel officials said it would be hard to justify a reduction in supplies at current price levels, despite expectations that demand will dip seasonally as the Northern Hemisphere winter comes to an end.
Venezuela is locked in a legal tussle with the US firm ExxonMobil, the world's largest oil company, over the nationalisation of its assets in the country. Courts in the US and Britain have frozen assets belonging to the Venezuelan state oil company, and tensions are running high.
Oil prices first touched $100 a barrel on 2 January, when a single trader purchased oil futures at a triple digit price, but the price receded, only to creep higher in the past month, in part because the currency in which oil is traded, the US dollar, has fallen in value.
Adding to concerns yesterday, a rumour swept trading floors that Henry Okah, a rebel leader in Nig-eria's oil delta, had been killed, foreshadowing growing unrest there – although that was later denied by the country's government news agency. Traders also blamed news of a fire at a Texas oil refinery for adding to fears of supply disruptions and increasing pressure on prices.
"It was just a matter of time before we were going over $100," said Tom Bentz of BNP Paribas. "We had a correction to $86, but it's on a straight run right back up ever since. There are enough issues out there to keep things rolling."
Share prices took a tumble after the oil price breached the $100 landmark, giving up early gains amid concern about the effect of high fuel costs on business profits and on already weak consumer spending. A US government survey showed that prices at the pump had soared back past $3 per gallon in the past week.