NEW YORK/LONDON, 24 June 2005 — Crude oil futures hit a historic high of $60 a barrel yesterday in New York, as traders bet on strong demand that may not be satisfied in the coming months. The benchmark August contract on the New York Mercantile Exchange traded as high as $60 and then eased back slightly to $59.80 a barrel moments later. The same contract fell 95 cents Wednesday to $58.09 a barrel.
“Sixty dollars was a magnet” that pulled in buyers, said Bill O’Grady at AG Edwards shortly after the record trade. The new high broke a record set earlier this week of $59.70 on supply concerns amidst strong demand for energy from China and the United States.
“Traders are grabbing any reason to push prices higher. With the 60-dollar barrel in sight, traders just want to pierce that level,” PFC analyst Jamal Qureshi said before the record was set.
Demand for refined crude products is usually the strongest in the second half of the year and has been one reason, along with worries over supply, for high oil prices of late. But today’s price action appears to be a little too steep even against this backdrop. “Current trading is in no way related to fundamentals. It is purely technical. The fundamentals just do not justify the price,” said Fimat Futures analyst Steve Bellino.
World oil prices rallied strongly yesterday on mounting concerns that demand for energy products may not be satisfied during the fourth quarter amidst tight supplies, analysts said in London.
In London, the price of Brent North Sea crude oil for delivery in August gained 80 cents to $57.38 per barrel. Earlier this week, crude futures struck record high points of $59.70 in New York and $58.58 in London on supply concerns amidst strong demand for energy from China and the United States.
But a predicted push through $60 failed to materialize in large part because the Department of Energy crude inventories numbers, published Wednesday, contained no major surprises. “Robust demand continues to reinforce our view of the likelihood of further price increases,” Barclays Capital analyst Kevin Norrish said.
Crude oil reserves fell by 1.6 million barrels in the week ending June 17 to 327.4 million barrels, the DoE said. Gasoline, or petrol, inventories rose 200,000 barrels to 215.9 million in the week. Distillates, used for heating oil and diesel, rose by 1.3 million barrels to 111.5 million. “The report did not prove to be overtly bullish but still showed a bit of tightness, which gave the market all the incentive it needed to push higher at a time when the high prices do not appear to be slowing demand,” analysts at the Sucden brokerage firm said.
“Consumption for diesel has been running at over 6.0 percent above year-ago levels, fuelling fears that refiners maximizing production of motor fuels will not be able to build prewinter heating oil inventories later in the year,” they added.