Crude Oil Futures on the New York Mercantile Exchange Hit $100 a Barrel
for 1st Time Ever
NEW YORK (AP) -- Oil prices soared to $100 a barrel Wednesday for the
first time ever, reaching that milestone amid an unshakeable view that
global demand for oil and petroleum products will continue to outstrip
Surging economies in China and India fed by oil and gasoline have sent
prices soaring over the past year, while tensions in oil producing
nations like Nigeria and Iran have increasingly made investors nervous
and invited speculators to drive prices even higher.
Violence in Nigeria helped give crude the final push over $100.
Light, sweet crude for January delivery rose $4.02 to $100 a barrel on
the New York Mercantile Exchange before slipping back, according to
Brenda Guzman, a Nymex spokeswoman.
Word that several Mexican oil export ports were closed due to rough
weather added to the gains.
In Nigeria, bands of armed men invaded Port Harcourt, the center of the
oil industry Tuesday, attacking two police stations and raiding the
lobby of a major hotel. Four policemen, three civilians and six
attackers were killed. The Niger Delta Vigilante Movement claimed
responsibility for the attack.
"Although the violence has not impacted oil flow out of the country, it
has reignited supply concerns as militant attacks have reduced Nigeria's
crude output by roughly 20 percent since 2006," said John Gerdes, an
analyst at SunTrust Robinson Humphrey in a research note. Nigeria is
Africa's largest oil producer.
Separately, the Organization of Petroleum Exporting Countries said its
member nations may not be able to meet demand as early as 2024, though
OPEC also said that deadline could slide for decades if members increase
production more quickly.
Still, the warning gave investors pause, said Amanda Kurzendoerfer, an
analyst at Summit Energy Services Inc. in Louisville, Ky.
"They're talking about, in 20 years, not being able to meet demand,"
Light, sweet crude for February delivery rose $3.38 to $99.36 a barrel
on the New York Mercantile Exchange Wednesday. News of the Mexican port
closures added to the supply concerns, pushing crude futures as high as
$99.60, a new trading record. The three ports handle most of Mexico's
1.7 million barrels of daily exports.
Oil last traded over $99 a barrel on Nov. 26, a few days after rising to
a previous record high of $99.29. Oil prices are within the range of
inflation-adjusted highs set in early 1980. Depending on how the
adjustment is calculated, $38 a barrel then would be worth $96 to $103
or more today.
Trading volumes were about 50 percent of normal Wednesday, meaning the
price move was likely exaggerated by speculative buying.
"I would imagine the speculators are the biggest drivers today," said
Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
At the pump, meanwhile, gas prices rose 0.6 cent Wednesday to a national
average of $3.049 a gallon, according to AAA and the Oil Price
Information Service. Gas prices, which typically lag the futures market,
have edged higher in recent days as oil has approached $100.
Gas prices peaked at $3.227 a gallon in May as refiners faced
unprecedented maintenance issues and struggled to produce enough
gasoline to meet demand. A similar scenario is expected this spring,
when gas prices could peak above $3.40 a gallon, according to the Energy
Department's Energy Information Administration.
But until the production rises in the spring to meet summer driving
demand, gasoline prices will follow oil's lead, analysts say. Oil prices
have risen in recent weeks in part on concerns about supply disruptions
in Iraq and Nigeria, and as domestic inventories have fallen for several
weeks in a row.
Inventories likely fell last week by 1.8 million barrels, according to
the average estimate of analysts surveyed by Dow Jones Newswires. That
expectation was also pushing oil prices higher, analysts said.
"(A decline) is not anything unusual for this time of year, but when it
happens for 7 weeks in a row, it starts to add up," Kurzendoerfer said.
The EIA's inventory report, delayed until Thursday this week due to the
New Year's holiday, is also expected to show gains in gasoline supplies
and refinery activity, and a decline in supplies of distillates, which
include heating oil and diesel.
In other Nymex trading Wednesday, February heating oil futures rose 9.28
cents to $2.7422 a gallon while February gasoline futures climbed 8.07
cents to $2.5717 a gallon. February natural gas futures advanced 26
cents to $7.743 per 1,000 cubic feet.
In London, February Brent crude rose $3.08 to $97.55 a barrel on the ICE