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Oil hits record on supply fears Oil hits record on supply fears
(about 3 hours later)
Oil prices have surged to a record of nearly $79 a barrel, a day after Opec said it would boost its output of crude in an effort to ease cost pressures. 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.
A barrel of US light, sweet crude was worth $78.99 in trading in New York, passing the previous high of $78.77. US light, sweet crude surpassed the landmark level in afternoon trading before easing slightly to $79.71.
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.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.
They have warned prices could go even higher, even if supplies are boosted. 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.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.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."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.
'Not enough' 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.
This is a market that wants to run up on the slightest bit of information Jim Ritterbusch, Rittersbusch & Associates
London Brent crude, meanwhile, hit a high of $77.93 before easing to $77.71.
Adjusted for inflation, current oil prices remain below highs seen in 1980.
The fresh price spike was triggered by data showing 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.
"This is a market that wants to run up on the slightest bit of information," Jim Ritterbusch, president of oil analysts Ritterbusch & Associates, said.
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.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.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.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.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.Opec, which supplies more than a third of the world's oil, is already exceeding its set daily quotas by 900,000 barrels.
Analysts are awaiting the latest weekly figures on US crude stockpiles published later on Wednesday with forecasts suggesting a fall of more than two million barrels.
US crude settled at a record closing price of $78.23 on Tuesday while London Brent crude was up 39 cents at $76.77.