Oil prices climbed by almost $1 a barrel today to trade at record highs near $61 a barrel amid concerns that supplies will not meet demand, especially in the United States.
VIENNA, Austria — Oil prices climbed by almost $1 a barrel today to trade at record highs near $61 a barrel amid concerns that supplies will not meet demand, especially in the United States, the world’s largest energy consumer.
Analysts said with $60 a barrel no longer a threshold — and amid continued concerns about limited refining capacity around the globe — prices appeared set to go even higher.
The front-month August contract for crude rose $1.06 to $60.90 a barrel in afternoon trading on the New York Mercantile Exchange. On Friday, August futures settled at a record $59.84 a barrel.
Other petroleum products followed crude’s rise. Despite a traditional seasonal lull, heating oil rose more than 3 cents to $1.68 a gallon. Gasoline futures surged 2.5 cents to $1.68 a gallon.
On London’s International Petroleum Exchange, August Brent was up 40 cents at $58.76 a barrel.
Nymex crude had briefly touched the $60 mark on several occasions last week before Friday’s settlement price, the highest since futures began trading on the exchange in 1983.
“The psychology of the market is that once $60 is breached, then there is tendency to test how much higher it can go, or how long $60 can be sustained,” said Victor Shum, petroleum analyst at Texas-headquartered energy consultants Purvin & Gertz in Singapore.
“There’s a lot of speculative activity. It is a red-hot market,” said Shum.
Vienna’s PVM Oil Associates said the election of a perceived hard-liner as Iran’s president and market speculation likely also were contributing to bullish sentiment.
Oil prices are more than 60 percent higher compared to a year ago, but would still have to surpass $90 to breach the all-time, inflation-adjusted high set 25 years ago.
Much of the concern surrounding crude is demand-driven speculation, analysts say, and it stems from how much supply there is and how much spare, in the event of a production glitch.
With demand expected to average 84 million barrels a day in 2005, there is not enough of a supply cushion to shield the market from any prolonged output disruption. Excess production capacity is estimated to be about 1.5 million barrels a day, most of it in Saudi Arabia.
Another reason for trepidation among traders is the limited refining capacity in the United States, which is increasingly reliant on imports of gasoline. Any glitch in the U.S. refining system puts more strain on the global supply chain.
Still, record-setting prices have yet to cool demand for gasoline in the United States, where consumption is up — in a time when prices are 40 percent higher compared with a year ago.
“These high prices really have not significantly dented demand, particularly in the United States market,” said Shum. “U.S. refineries in the past week have been running very full at 96, 97 percent.”
The Lundberg survey, which tracks gasoline prices from 7,000 gas stations in the United States, said Sunday prices at pumps across the country were up an average of 8 cents a gallon for the two-week period ended June 24.
With the summer driving season under way, the average retail price for all three grades of gas hit $2.24 a gallon on Friday, up from $2.16 on June 10.
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah over the weekend began consultations with fellow members as to whether to release another half million barrels into the market, but said they would monitor prices further first.
“I think we’ve got to wait for a while to see exactly what is the behavior of the prices, because until now it’s not clear,” said Al Sabah.
The Organization of Petroleum Exporting Countries raised its production quota by 500,000 barrels in mid-June, bringing the official output target to 28 million barrels a day. However, traders brushed off the move as insignificant since it would further deplete the cartel’s razor-thin supply cushion and because its members were already pumping above the quota.
Including Iraq, which is not bound by the quota, OPEC’s production is close to 30 million barrels a day.
Associated Press Writer En-Lai Yeoh contributed to this story from Singapore.