ENERGY
Oil passes 96 dollar a barrel
Thursday, November 1, 2007
Oil prices barreled through new records of more than 96 dollars in Asian trade Thursday after the Federal Reserve lowered interest rates and following news of a surprise decline in US crude stocks.
Thursday, November 1, 2007
By AFP
New York's main futures contract, light sweet crude for delivery in December, was trading at 95.64 dollars a barrel, up 1.11 dollars, or 1.2 percent, from its close of 94.53 dollars a barrel in US trades. It also smashed Wednesday's record of 94.74 dollars.
The New York contract earlier surged to an all-time intraday summit of 96.24 dollars. Prices had risen 4.15 dollars, or about five percent, in New York Wednesday following the interest rate cut.
Brent North Sea crude for December delivery also erased the previous day's intraday high of 90.94 dollars to trade at 91.54 dollars, up 91 cents, or 1.0 percent.
"Now, it seems that triple digits is going to be the target," said Tony Nunan, manager for energy risk at Mitsubishi Corp in Tokyo, referring to oil at 100 dollars a barrel. "It's anybody's guess."
At current prices, oil is just four dollars off the 100-dollar mark.
"The increase in oil prices was driven by the release of the US Energy Information Administration's Weekly Petroleum Status report, which showed a large decline in US crude oil inventories," the Commonwealth Bank of Australia said.
Oil prices had earlier slumped below 90 dollars on Wednesday but staged a blistering rally after the Federal Reserve slashed key US interest rates by a quarter of a percentage point to 4.50 percent.
The cut is targeted to boost domestic consumption in the world's biggest economy and cushion the impact of a crisis in the US subprime mortage housing market which has been rocked by defaults. A healthy US economy prompts higher demand for oil.
Oil prices also rose after the US Department of Energy's (DoE) weekly snapshot of energy reserves showed that crude inventories tumbled by 3.9 million barrels to stand at 312.7 million barrels in the week ended October 26.
That shocked the market because consensus forecasts had been for a gain of 400,000 barrels in the reserves of the world's biggest energy consumer and underscored a tight supply situation.
Compared with November last year and January 2007, current oil prices are more than 60 percent higher.
Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, said airlines are expected to ride through high oil prices because of strong travel demand.
"In this market you've got very strong economies which means strong demand and you haven't got enough seats flying," he told AFP on the sidelines of an aviation conference.
But Harbison also said the airline industry could still take a hit if the soaring oil prices lead to slower global economic growth.
Tony Fernandes, chief executive of Malaysian budget carrier AirAsia, said he was not worried about the rampaging oil prices.
"Oil is what it is, you got to live with it," he told AFP. "Basically, you've got to build a sustainable business model."
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