Crude oil prices to continue surging
Updated: 2008-01-03 20:06
NEW YORK -- Crude-oil futures hit the long-expected, psychologically key triple-digit mark Wednesday, the first trading day in 2008.
Major reasons behind Wednesday's price hike were falling US crude inventories for a seventh consecutive week and investors' concerns about a possible output cut by Nigeria, Africa's biggest oil producer following recent violence in the country.
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A dog looks out of a car window as its owner uses a petrol pump at a petrol station in Berlin Jan 3, 2008. Analysts believe that oil prices will continue surging after hitting the 100-dollar mark due to rising global demand and short supply. [Agencies] |
Crude price for February delivery rallied 3.64 dollars to close at 99.62 dollars a barrel on the New York Mercantile Exchange, the highest closing price of a front month contract. Futures surged 4.02 dollars and hit 100 dollars a barrel in early afternoon trading.
Analysts here believed that oil prices will continue surging after hitting the 100-dollar mark.
They attributed the surge mainly to rising global demand for oil and short supply. The situation seems hard to reverse any time soon, they said.
Oil prices rose nearly 58 percent last year, the biggest annual gain this decade, rallying strongly in the fourth quarter to touch a record 99.29 dollars a barrel on November 21 as the dollar fell and US oil inventories sank.
DEFICIT BETWEEN DEMAND, SUPPLY -- ROOT CAUSE DRIVING UP OIL PRICES
"Oil could rise further from here," said Kris Voorspools, an analyst at Fortis in Brussels.
"It's simple supply and demand fundamentals...Demand is going up and I think there is a structural problem with the refining sector. There's higher demand for higher-quality products and refineries are simply not up to making those kinds of products."
The US Department of Energy (DOE) said in a report that strong demand and limited supply is the root cause for the high price of oil. The DOE said oil producers are turning out 84.64 million barrels a day, while the daily consumption is 85.7 million barrels.
The daily deficit is more than 1 million barrels and is expected to increase next year, it said.
Political unrest around the world has again become a major factor, said David Johnson, an oil analyst with Macquarie Securities in Hong Kong. Major geopolitical tensions include:
-- Tension along Turkey's border with northern Iraq has added to concerns about geopolitical instability;
-- The violence in Nigeria raises concerns that a return to chaos could begin to disrupt international oil flows again;
--In Pakistan, where tensions have risen sharply after the assassination of former Prime Minister Benazir Bhutto last week.
"Market may be building in more of a geopolitical risk premium," said John Kilduff, an analyst at futures brokerage MF Global, in a research note.
OTHER FACTORS BOOSTING OIL PRICES
Apart from the fundamentals of supply and demand, many other factors have also played significant roles in boosting oil prices.
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