Detroit is in trouble-again with the wrong product mix
Oil futures surpass $90 a barrel
NEW YORK - Oil prices surpassed $90 a barrel for the first time
Thursday as the falling dollar drew new foreign investors and
speculators to dollar-denominated energy futures.
Light, sweet crude for November delivery hit $90.02 in electronic
trading Thursday evening before returning to around $89.60. Earlier,
prices had risen $2.07 to settle at a record $89.47 on the New York
While oil prices have risen sharply in dollar terms in recent days, the
steadily weakening dollar means oil futures are seen as a bargain
overseas. Data released in recent weeks shows speculative buying of oil
futures is on the rise. Buying by foreign investors sends prices up,
which draws more speculators into the market.
"It becomes a self-fulfilling prophecy," said Brad Samples, commodities
analyst at Summit Energy Services Inc. in Louisville, Ky.
Many analysts feel that the underlying fundamentals of supply and demand
do not support oil prices of $90 a barrel. On Wednesday, the Energy
Department reported that oil and gasoline supplies rose more than
expected last week, countering suggestions that supplies are tight.
"Fundamental reasons, we're kind of running out of them," said James
Cordier, president of Liberty Trading Group in Tampa, Fla. "The main
driving factor today is ... the dollar making an all-time low against
the euro," he said.
However, crude supplies at the closely watched Nymex delivery point of
Cushing, Okla., fell last week. And several reports in recent days have
predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices have set new records.
Despite the gains, the price of oil is still below inflation-adjusted
highs hit in early 1980. Depending on the adjustment, a $38 barrel of
oil in 1980 would be worth $96 to $101 or more today.
November gasoline rose 3.85 cents to settle at $2.1851 a gallon, while
Nymex heating oil futures rose 3.04 cents to settle at $2.3493 a gallon.
November natural gas futures fell 8.4 cents to settle at $7.374 per
1,000 cubic feet as investors shrugged off an Energy Department report
that inventories rose by 39 billion cubic feet last week, less than
analysts had expected. Supplies are high by historical standards.
In London, December Brent crude rose $1.47 to settle at $84.60 a barrel
on the ICE Futures exchange.
At the pump, gas prices are finally beginning to follow oil futures
higher. The national average price of a gallon of gas rose 1.9 cents
overnight to $2.795, according to AAA and the Oil Price Information
Service. Many analysts think prices will move even higher in coming days
if oil prices don't retreat.
Some analysts think oil prices are nearing a seasonal peak and will soon
begin to fall.
"It's hard to pick a top in a raging bull market, but it's possible that
we are close," said Phil Flynn, an analyst at Alaron Trading Group in
Chicago in a research note.
And if prices start to fall, they could fall quickly as speculators sell
to lock in profits.
"We don't think industry fundamentals support oil prices near $60 (a
barrel), let alone $90, but with excessive speculation and lack of
government scrutiny, prices could go even higher, before they crash,
eventually, in our view," said Fadel Gheit, an analyst at Oppenheimer &
Co., in a research note.