[A-List] Big fifty!
sherrynstan at earthlink.net
Tue Sep 28 16:12:43 MDT 2004
Oil prices raced to new record highs above $50 on Tuesday, despite a
pledge by OPEC producer Saudi Arabia to increase production, as rebel
threats against Nigerian oil facilities threatened to inflict further
strain on global supplies.
U.S. light crude touched a high of $50.47 a barrel before settling at
$49.64, up 26 cents on the day. London's Brent crude set a new peak at
$46.80 a barrel and ended at $46.45, up 52 cents.
Oil has grabbed the financial market spotlight this year, surging 55
percent as rising consumption and the fallout from years of
underinvestment in supply infrastructure tempts heavy buying from
"Fifty-dollar oil is just another stop on the road to much higher crude
prices," said Peter Schiff, president of asset managers Euro Pacific
Capital, which oversees $350 million.
Schiff sees the current price spike topping off at $55 to $60 a barrel.
Producers are pumping at just about full tilt to feed demand as China's
economic expansion powers the fastest output growth in 24 years. Worries
about supply security in Saudi Arabia, Iraq and Russia have magnified
the price surge.
The move above $50 prompted top OPEC exporter Saudi Arabia to announce
it will boost its official production capacity by 500,0000 bpd, to 11
million bpd, to help ease supply concerns.
The new capacity is not expected to make any immediate impact on actual
production with Riyadh already having said it will meet demand for 9.5
mln bpd this month and next.
OPEC, which controls more than half of global crude exports, is
producing at its fastest rate since the late 1970s in an effort to
control prices, but much of the extra crude is not of the quality best
suited for transportation fuels.
"At the moment there's nothing we can do. OPEC has spare capacity,
however, whatever we do there is no sensitivity in the market," OPEC
president Purnomo Yusgiantoro told Reuters on Tuesday.
Prices hit new highs after rebels fighting for self determination in
Nigeria warned oil companies to shut production in the Niger Delta
before they declare an all-out-war on Oct 1.
Companies working in the delta shrugged off the threat. Royal
Dutch/Shell and Italy's Agip, a unit of ENI, said they saw no reason to
stop oil operations. Shell has already cut 30,000 to 40,000 bpd due to
So far global economic growth has withstood the impact of higher energy
In real terms, stripping out the impact of inflation, oil prices are now
near levels hit during the Arab oil embargo of 1973-4, though much lower
than the record $80 annual average high following the 1979 Iranian
"Oil may be still be cheap. If crude had merely kept pace with the
increase in the ex-energy consumer price index since 1980, it would be
trading at $95 a barrel right about now," said Merrill Lynch bank in a
"This will ultimately prove to be a painful transition ... it's already
starting," the report added.
The big question now is whether prices will push higher still. European
Union Energy Commissioner Loyola de Palacio said the pressure on prices
would ease after the U.S. presidential election in November.
A string of hurricanes in the oil-producing Gulf of Mexico have
accelerated the price rise by delaying shipments and disrupting offshore
production and refinery operations.
U.S. crude stocks have fallen for the last eight weeks and are running
at a 13 million barrel deficit compared with a year ago, at a time when
they should be building ahead of winter.
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