The price of oil edged above $80 a barrel for the first time in a year yesterday, encouraged by better than expected corporate earnings but putting hopes of an economic recovery at risk.
After nudging past the milestone in Asia overnight, the price slipped back to $78.80 in trading yesterday. While the $80 mark is an important psychological barrier for the energy markets, the peak follows a 10 per cent rise in crude prices since the start of October.
The increase was attributed to impressive earnings from American companies such as Apple and Texas Instruments, which came after the closing bell in New York on Monday, and also to the US dollar's fall against other major currencies.
"The oil price is not really following demand and supply signals," said David Hunter, an analyst at the independent energy consultancy McKinnon & Clarke. "The increases this month are related to signs of economic optimism, especially in the US, as well as a weaker dollar price and seasonal increases in demand for fuel."
The oil producers' cartel, Opec, reacted to the rise by cautioning against further increases. The head of Opec, Abdallah Salem el-Badri, said an oil price of more than $80 risked damaging any burgeoning economic growth.
Mr Badri said there was "no shortage of oil supply", adding: "When we see that floating storage eliminated it means demand is coming. We are seeing an $80 oil price that is a little bit high."
There are currently 125 million barrels of oil in floating storage. Earlier this year, the price of oil crashed to lows of $40 a barrel, from highs of $147 in July 2008, as recession followed the meltdown in the banking system.Reuse content