Singapore: Oil edged close to $105 a barrel in Asian trade on 6 March 2008, touching another new record high after an unexpected drop in US stockpiles and OPEC’s rejection of calls to increase output.
Dealers said the continued weakness of the dollar was also helping drive crude prices, which have hit a string of records and led US President George W. Bush to urge the OPEC cartel to boost production.
New York’s main contract, light sweet crude for April delivery, traded briefly at a new high of $104.95 before easing to $104.37. It closed at $104.52 on 5 March.
London’s Brent North Sea crude for April delivery eased eight cents to $101.56 a barrel from its record close of $101.64.
In announcing it would maintain daily production at the current level of 29.67 million barrels, OPEC on 5 March said that the market was “well-supplied” — a sentiment not fully shared by traders.
“The truth of the matter is there is not a lot of supply in the supply chain,” said Justin Wilks, director of trading and operations at Global Commodities fund group in Australia.
With prices over $100, Wilks said: “I would suggest that we would have to get used to it.”
Prices shot higher in US trading hours after the US Department of Energy said crude inventories tumbled by 3.1 million barrels last week.
That confounded market expectations of a rise of 2.4 million barrels and was the first weekly drop for a month and a half.
The Organization of the Petroleum Exporting Coutries blamed the high cost of crude on speculative buying as investors sought a haven amid a weak dollar and high inflation.
“The market is well-supplied, with current commercial oil stocks standing above their five-year average,” it said after meeting in Vienna to discuss output policy.
It said the current price of crude “does not reflect market fundamentals (of real supply and demand).”
OPEC president Algerian Oil Minister Chakib Khelil said the group — which accounts for 40% of the world’s oil — was actually pumping 32 million barrels a day.
But President Bush, whose nation is the world’s biggest energy consumer, was “disappointed” by the decision not to pump more, his spokeswoman Dana Perino said.
“We know that there is high global demand and there is tighter supply. So what we would like is to see an increase in supply from OPEC,” she said.
The International Energy Agency, an official energy watchdog for oil-consuming countries, also criticized OPEC’s decision and urged the cartel to take note of the record prices.
“High prices are sending a strong signal that the market thinks it is not enough,” the Paris-based agency said.
“We may need more oil before the summer and therefore urge OPEC countries to listen to market signals.”