[NYTr] Booming Economy: Oil hits record high on supply fears

[All the News That Doesn't Fit]

BBC - Sep 12, 2007
http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/6991567.stm

Oil hits record on supply fears

Oil prices have risen above $80 a barrel for the first time, a day
after Opec moved to boost its output of crude in an effort to ease cost
pressures.

US light, sweet crude surpassed the landmark level before closing
slightly lower at $79.91.

Opec members said they would raise production by 500,000 barrels a day
but some analysts have said the move is little more than a token
gesture.

Figures also showed a sharp decrease in US crude stockpiles last week.

Market speculation

Analysts have warned prices could go even higher, even if supplies are
boosted.

As well as increasing global demand, many investors are speculating
that oil prices will keep rising and buying the commodity.

That in itself is pushing prices higher, analysts said.

"The Opec outcome was not enough of a shocker to turn around a market
that likes to read extremes," said Olivier Jakob, from oil consultancy
Petromatrix.

US crude had settled at a record closing price of $78.23 on Tuesday and
soon moved past the previous record high of $78.77.

London Brent crude, meanwhile, hit a high of $77.93 before easing to
$77.68.

Adjusted for inflation, current oil prices still remain below highs
seen in 1980.

The fresh price spike was triggered by data showing US stockpiles fell
to their lowest level in eight months.

Supplies decreased by 7.1 million barrels last week, according to the
U.S. Energy Information Administration, a much larger fall than had
been anticipated.

This bolstered concerns of supply pressures over the winter months.

"We are getting increasingly into a drier situation in respect with the
amount of gasoline in storage," said John Kilduff, an analyst at MF
Global.

"There is zero room for error."

Opec move

The 12-nation oil producers' cartel, Opec, initially seemed reluctant
to increase its output despite warnings from the International Energy
Agency that additional supplies were needed to meet demand.

But pressure from several influential members such as Saudi Arabia, who
were concerned that high prices would hurt demand for oil, eventually
overcame opposition from others.

It had been expected that Opec's move would eventually depress prices
and that this could help ease recent US economic and global stock
market jitters.

But there are also concerns that the market could be oversupplied
should any weakening of the US economy reduce demand for oil.

Opec, which supplies more than a third of the world's oil, is already
exceeding its set daily quotas by 900,000 barrels.

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