New York: Oil climbed to settle near $61(Rs2,689) a barrel on 22 February 2007, the highest closing price this year, after the US government reported surprisingly large drops in gasoline and heating oil inventories.
Tension between Western powers and Iran have also boosted energy prices over the past two days; the United Nations’ nuclear watchdog reported on 22 February that Iran is still refusing to end its nuclear programme.
“It’s a great excuse to buy today,” said James Cordier, president of Liberty Trading Group in Tampa, Florida. The UN report was hardly a surprise, and Cordier pointed out that it does not change the fundamental supply-and-demand picture right now. But against the backdrop of lower petroleum product inventories, hedge fund money pouring into commodities, and the upcoming driving season, traders saw it as a buying opportunity.
Giving the energy markets an additional lift, stock indexes around the world, including those in Australia and South Korea, have been hitting all-time peaks. “Global expansion means global energy demand,” Cordier said. “We probably haven’t seen the likes of what we’re going to see in 2007.”
Light, sweet crude for April delivery rose 88 cents to settle at $60.95 a barrel on the New York Mercantile Exchange, after spiking as high as $61.25. It was the first time crude traded above the $61 mark since 29 December 2006, and its highest closing price since it finished at $61.05 on that date. Crude has risen nearly 5% in two days.
U.S. crude inventories climbed by 3.7 million barrels to 327.6 million barrels in the week ending 16 February 2007, the Energy Information Administration said . But what stoked the market’s advance were gasoline inventories falling by 3.1 million barrels to 222.1 million barrels, and distillates, which include heating oil and diesel, dropping by 5.0 million barrels to 128.3 million barrels.
Most of the distillate drop was caused by high demand for heating oil supplies, sparked by record-breaking chilly weather and snow storms in the Northeast and Midwest regions of the United States.