Oil price closes in on $100 a barrel as global demand continues to rise
Thursday 13 January 2011
The prospect of $100-per-barrel oil hove into view yesterday, as crude prices rose almost to within a dollar of the psychologically important level last seen more than two years ago.
Short-term factors – such as cold weather in parts of the US, a drop in existing stockpiles, and the recentclosure of a major pipeline pumping oil from Alaska – conspired to push Brent crude to $98.80 in London, and prices of light sweet crude also rose in New York trading by more than 1 per cent to $91.99.
However, the much longer drift upwards from its nadir in 2009 has been driven by improving prospects for the world economy, and therefore for energy demand.
The $100 barrel is "only a matter of time, if sentiment remains positive and more disruptions on the supply side come in," said Carsten Fritsch, analyst at Commerzbank.
Oil first traded above $100 three years ago this month, and peaked at $147 a barrel in summer 2008, before the financial crisis swept across the world. Global oil demand this year is expected to hit a record 88.6 million barrels per day.
As well as market expectations of future demand, the price is also being inflated by the relative weakness of the US dollar. Traders were yesterday poring over the last inventory data from the US, the world's largest oil consumer.
The US Department of Energy reported an unexpected drop in oil stockpiles, which were down by 2.2 million barrels last week, at a time of year when inventories are usually replenished. There was also expectation that the overnight snowstorm, the latest in a series to hit the northeastern US, would mean more heating-fuel consumption that would drain stockpiles further.
BP's trans-Alaska pipeline, which supplies around 10 per cent of the US's daily oil needs, has been disrupted since Saturday, when the discovery of a small leak led to its shutdown. Regulators have still not given permission for a full restart, but yesterday it was back to pumping at about two-thirds its usual rate.
Oil's rise is part of a broader lift for commodities prices, which were higher across the board yesterday. A new forecast of a poor US grain harvest sent corn prices soaring to fresh two-year highs, and trading had to be temporarily suspended because of the frenzy. Cotton prices are almost at the highest they have been since the US Civil War, after flooding in Australia.
However, it is the rising oil price that most concerns economists, with the Opec group of oil-exporting nations coming under increasing pressures to raise production levels, which they cut back during the global slowdown that hit in 2009.
The International Energy Agency said last week that the rising oil price now represented a major threat to the global economic recovery.
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
- 1 Mario Balotelli: Staff at arson-hit Manchester Dogs' Home convinced Liverpool striker is behind five-figure donation
- 2 Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
- 3 iOS 8 is full of shiny new features - but it's terrible news for app developers
- 4 Friends 20th anniversary: Six things we wouldn't have without influential comedy series
- 5 Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
Scottish independence referendum results: David Cameron pledges plans for 'English votes for English laws' by January
Scottish independence live: Scotland gives a clear 'No' in historic referendum - as it happened
Scottish referendum results: David Cameron set to unveil major devolution of powers to England
Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
Scottish independence: Tory revolt against 'devo max' grows as Rail Minister Claire Perry joins
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...