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Crude oil prices briefly climb above $52 mark
Brad Foss AP Business Writer
Crude futures briefly rose above $52 a barrel March 2 as traders bet that prices will go higher — given the world’s strong demand and thin supply cushion — and downplayed a U.S. government report that showed domestic supplies of oil and gasoline rising.
“They believe the market is going to $60 and the only thing that’s going to stand in the way from time to time is the fundamentals,” said Ed Silliere, vice president of risk management at Energy Merchant Corp.
Silliere said that the Energy Department report was roughly in line with traders’ expectations and therefore wasn’t tempering the market’s recent move higher. Oil prices are up about $10 a barrel since the beginning of the year, when the Organization of Petroleum Exporting Countries officially cut back its daily output by 1 million barrels. OPEC unlikely to cut output Recent signals from OPEC officials that the cartel was unlikely to cut production at its next meeting — as some had originally been suggesting — have failed to calm the market.
Light, sweet crude for April delivery rose 22 cents to $51.90 a barrel in midday trading on the New York Mercantile Exchange. Prices retreated from an earlier intraday high of $52.50.
In other Nymex trading, April gasoline futures rose 3.43 cents to $1.437 per gallon, while heating oil futures were steady at $1.467 per gallon.
Oil prices are roughly 43 percent higher than a year ago, rising sharply in recent weeks due to a combination of colder weather, the declining value of the dollar and the world’s tight supply-demand balance. Instability in Iraq and underlying fears about terrorism have also played a part in the rally.
Lawrence Eagles, head of the oil markets division at the Paris-based International Energy Agency, cautioned that the current oil price is a “short-term signal,” though indeed a strong one with regard to the world’s oil supply-demand balance. The IEA, a watchdog for the Organization for Economic Cooperation and Development, last month raised its estimate of 2005 oil demand to about 84 million barrels a day, or about 1.5 million barrels a day above last year’s level.
The U.S. Energy Department said in its weekly supply report that commercial inventories of crude oil rose by 2.4 million barrels to 299.4 million barrels, or 9 percent above year ago levels. The supply of gasoline in the world’s largest consuming nation grew by 1 million barrels to 224.5 million barrels, or 10 percent above last year’s level.
The supply of distillate fuel, which includes heating oil and diesel, shrank by 1.8 million barrels to 110 million barrels, or 3 percent below year ago levels. Analysts predicts prices will stay high On March 1, crude oil prices fell slightly in New York after the OPEC acting secretary general, Adnan Shihab-Eldin, said the group may decide to maintain its current production levels at a March 16 meeting in Isfahan, Iran.
Shihab-Eldin’s comments came a day after Kuwait’s oil minister and current OPEC president Sheik Ahmed Fahd Al Ahmed Al Sabah said the group, which pumps more than a third of the world’s oil, would maintain or increase its oil supply at the meeting. Al Sabah also said that Algeria, Nigeria and Libya favor leaving quotas unchanged.
Oil prices rose 5 percent in the last week of February as a late cold snap in the U.S. Northeast and Europe raised expectations for March heating fuel consumption.
Victor Shum, an oil analyst at Texas-based Purvin & Gertz of Singapore, said the bullish effect of the cold weather was likely to cancel out the bearish comments from OPEC in the short term.
“Prices will more or less stay at the current level,” he said.
Brent crude futures fell 9 cents to $50.02 on London’s International Petroleum Exchange.
-- Associated Press Writer Wee Sui Lee in Singapore contributed to this report.
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