NEW YORK, 4 January 2007 — Oil prices broke above $100 a barrel for the first time yesterday, after a US government report showed a steep slide in crude inventories in the world’s biggest energy consumer.
The surge in oil prices into the triple digits has darkened the economic outlook in the US, already battered by a housing crisis and credit crunch, and could threaten growth in big European energy-consuming nations.
“Oil prices have been increasing significantly. Now if this high level of prices is maintained then it will have an impact on the economy,” European Commission spokeswoman Amelia Torres told a news briefing.
US crude climbed 47 cents to a record $100.09 a barrel — breaking Wednesday’s $100 peak — before easing back to $99.63 by 1:47 p.m. EST (1847 GMT). Brent crude rose 28 cents to $98.12 a barrel.
The price of crude is up more than 71 percent from the same time a year ago, bolstered by thinning inventory levels, soaring demand from China and other developing countries, a weak US dollar, and geopolitical turmoil.
US President George W. Bush told Reuters in an interview yesterday that he was concerned about $100 oil, but saw no reason to tap the nation’s emergency crude reserve.
Yesterday’s gains came after the US Energy Information Administration reported that commercial crude stockpiles fell 4.0 million barrels last week to the lowest level since January 2005.
Crude stocks in the US have dropped more than 25 million barrels, or nearly 8 percent, since early November as import flows slowed down and shipments were hindered by foul weather on the Gulf Coast.
Adding support, Mexico’s main oil export ports remained shut yesterday after foul weather hit this week. Mexico is in the top three suppliers of oil to the US.
Yesterday’s gains added to a near 4 percent gain on Wednesday that was triggered by violence in Nigeria’s main oil port city, further threatening supplies from the world’s eighth largest crude exporter.
Frequent attacks by militant groups since February 2006 have driven thousands of foreign oil workers from the oil-rich Niger Delta and cut oil exports by about 20 percent. Oil, which rose by 57 percent in 2007, has scope to push even higher in 2008 along with other commodities, analysts said.
Despite oil rocketing to $100, the White House said it will not open up the nation’s emergency crude reserves to ease prices.
The Paris-based International Energy Agency (IEA) also said it would not coordinate a release of emergency crude stocks from its 27 member states.
“We are not going to carry out (an emergency) oil stock release,” William Ramsay, the IEA’s deputy head, told Reuters.
“We don’t respond to prices, and we don’t see any disruption in the physical oil market.” Officials from the Organization of the Petroleum Exporting Countries (OPEC), which decided at its last meeting in December to maintain output restrictions, said the group could do little to halt the rally.
OPEC froze its oil output levels at its last meeting in December, resisting calls for an increase to help cool sky-high prices that threaten to dampen global economic growth. OPEC which produces about 40 percent of world oil insisted that the market was well supplied and blamed market speculators for fueling prices.
OPEC officials lined up to say the exporter group could do little to tame oil prices that hit $100 a barrel for the first time on Wednesday and world markets had enough crude oil.
Officials said there was no plan for an emergency OPEC meeting before a scheduled Feb. 1 gathering. “The problem is not shortage of supply,” Hojjatollah Ghanimifard, international affairs director at the National Iranian Oil Company, told Reuters yesterday.
OPEC cannot tame the price rise because it is not a result of supply problems, Qatar’s Oil Minister Abdullah Al-Attiyah told Reuters on Wednesday. “I don’t think OPEC can do anything. If this was related to supply then we could move. Speculation has been very strong. It’s a game for speculators,” he said.
“I think the main problem is outside the oil market. Too much liquidity is available,” Ghanimifard said. “A big part of it is in the paper market of crude oil.”
“Demand will be affected, it is not very happy news because it brings a lot of reaction from the demand side,” said an official from another member country of OPEC.
