NEW YORK, 13 September 2007 — US crude oil futures marched to a new record at $80 yesterday, fueled by government data showing a heavier than expected stock drawdown last week and by weather worries.
Heating oil futures also hit a new record on fears heavy autumn refinery retooling may crimp supply ahead of the cold season.
On the New York Mercantile Exchange at 2 p.m. EDT (1800 GMT), October crude traded up $1.61 or 2.1 percent at $79.84 a barrel, after hitting $80, the highest level for a front-month crude contract since NYMEX began trading oil futures in March 1983. The day’s high eclipsed the previous record of $78.77 hit Aug. 1. On Tuesday, the contract settled at a record $78.23, which surpassed the July 31 mark of $78.21.
The large crude draw was “obviously a bullish number, a significant surprise to the market,” said John Kilduff, senior vice president at MF Global in New York.
In London yesterday, October Brent leaped $1.35 or 1.8 percent at $77.73, trading $76.09 to $77.90.
In New York, October heating oil gained 2.78 cents or 1.3 percent at $22.105 a gallon, after trading between $2.1771 and $2.2139, the highest since NYMEX launched heating oil trading in November 1978. The record erased the previous peak of $2.21 set on Sept. 1, 2005.
“There has been concern about the shallow buildup of heating oil stocks this summer and there’s validity in the worry about heavy maintenance crimping production,” said Andy Lebow, a broker for MF Global in New York.
Rising with crude, NYMEX October RBOB gained 3.28 cents or 1.7 percent to $2.0139 a gallon, trading $1.9664 to $2.0189. An alert from the National Hurricane Center that Tropical Storm Humberto had formed in the Gulf of Mexico provided the latest lift to energy futures, traders said.
Traders said the dollar’s plunge to a record low against the euro was also supportive as it makes oil cheaper for other currency holders.
The US Energy Information Administration said that crude stocks fell for the third week in a row last week, by 7.1 million barrels, to 322.6 million barrels, the lowest since the week to Jan. 19, well above the forecast for a 2.4 million barrel draw in a Reuters poll of analysts.
Gasoline stocks dipped for the sixth straight week, by 700,000 barrels to 190.4 million barrels, the lowest since the week to Sept. 2, 2005, and exactly as forecast in the poll.
Distillate stocks, which include heating oil and diesel fuel, rose for the eighth successive week, by 1.8 million barrels to 134 million barrels, also as forecast.
Meanwhile, the International Energy Agency (IEA) lowered its predictions of global oil demand yesterday for both this year and next and warned that financial markets turbulence could force it to again revise its forecast.
The IEA, which acts as energy policy adviser to industrialized countries, reduced its demand forecast to 85.9 million barrels per day in 2007 and 88 million bpd in 2008 from its prediction last month of 86 and 88.2 million bpd respectively.
“Mild weather and interfuel substitution have contributed to the fall in demand,” it said in its latest monthly report. “Looking ahead, continued high prices may further dent demand.”
OPEC agreed to raise crude output by 500,000 barrels per day (bpd) from Nov. 1 at its meeting in Vienna on Tuesday, in a gesture to consumer nations concerned about the economic impact of high oil prices and rapidly diminishing fuel stocks.
The IEA said its downward revision of demand had also been influenced by the OECD’s lowering of its 2007 outlook for the US economy amid concerns regarding the troubled subprime home loan sector.
The world’s foreign exchange and stock markets have been volatile over the last few weeks amid concerns over the US subprime sector of housing loans to customers with patchy credit histories. The defaults on subprime loans have raised fears that the flow of credit will dry up in world markets as investors scramble to contain their losses.
“The potential spill-over effects of the subprime crisis, which became particularly acute in August, are yet to be assessed,” said the IEA.
“It is likely that credit conditions in the US and other developed countries will tighten. As such, we may further revise our 2008 forecast as events unfold,” said the report.
The energy watchdog revised its oil product demand in OECD countries downward in both 2007 and 2008.
“Fuel oil and heating oil deliveries in June and July turned out to be weaker than expected, particularly in Europe and the Pacific, thus offsetting upward revisions in the first half of 2007,” it said.
Demand in the group of 30 industrialized nations in the OECD is now poised to increase by 0.4 percent in 2007 to 49.4 million bpd, and by 1.6 percent in 2008 to 50.2 million bpd, said the IEA. But it warned that this forecast was “open to revisions should the fallout of the subprime meltdown in the US prove to be more harmful than currently expected.”
It said that non-OECD oil product demand had remained virtually unchanged, as slight upward adjustments in China and the Middle East offset downward changes elsewhere.
“Overall, non-OECD demand is expected to reach 36.5 million bpd in 2007 (+3.5 percent on an annual basis) and 37.8 million bpd in 2008 (+3.6 percent).
“This relatively strong outlook continues to be supported by strong oil consumption in both China and the Middle East, which together account for over half of worldwide demand growth,” it said. “As such, if subprime woes are limited purely to the OECD, global demand would likely remain robust,” it said.
The IEA said world oil production had fallen 0.43 percent in August to 84.6 million bpd because of production interruptions in the Gulf of Mexico and the North Sea and a fall in Iraqi exports.
Production by the OPEC organization, which controls 40 percent of the world’s oil, was 30.4 million bpd in August, slightly down on July.