Oil prices crash through $92 a barrel

AFP - Oct 29, 2007

World oil prices surged to historic highs Friday, breaching $92 for the first time in New York on rising tension in crude-rich Iran and tight US energy supplies, analysts said.

"Now that oil is in the 90s, it is much easier to reach $100. Anything can happen in this market," Astmax fund manager Tetsu Emori said.

New York's main futures contract, light sweet crude for delivery in December, soared to a record-high $92.22 per barrel. It later stood at $91.44, a rise of $0.98 from Thursday's close.

In London, Brent North Sea crude for December delivery struck an all-time pinnacle of $89.30 per barrel Friday. It later stood at $88.14, up $0.66.

Crude futures have rocketed by about $10 in only a month and by $30, or 50 percent, in a year.
"Supply tightness and developments surrounding Iran remain the focus of attention," Sucden analyst Michael Davies said Friday.

The United States on Thursday escalated tensions over Iran's nuclear program and alleged backing for terrorism with a raft of new sanctions against the Islamic Republic's military and banks. Iran denounced the sanctions as illegal and "doomed to failure," but US Secretary of State Condoleezza Rice said Washington was well within its rights.

Crude futures had leapt by more than $3 on Thursday in reaction to the news, before extending their gains Friday.

Sucden's Davies, meanwhile, added that oil prices were winning support from a weak dollar, which makes commodities priced in the US currency cheaper for buyers using stronger units.

The dollar slumped to a record low against the euro on Friday after poor US economic data heightened expectations of a fresh cut to US interest rates next week, dealers said.

In early European trade, the euro struck $1.4375 - the highest level since the single currency's creation in 1999.

Astmax fund manager Emori added that oil prices were also being supported by OPEC's hesitance to increase production and rising tensions elsewhere in the Middle East.

Iraqi ministers held crisis talks Friday seeking to persuade an increasingly impatient Turkey against launching military strikes against rebel Kurd bases in northern Iraq, which is an oil-producing region.

The talks broke up after 90 minutes, but Iraqi Defense Ministry spokesman Muhammed Askeri said the meeting had produced "positive" results.

Another factor pushing up oil prices are tight energy supplies in the United States, the biggest consumer of energy.

The US Energy Information Administration (EIA) said Wednesday that stockpiles of crude had plunged by 5.3 million barrels in the week ending October 19. The market had expected a gain of 960,000 barrels.

Inventories of US distillates, which include diesel and heating fuel, sank by 1.8 million barrels last week.

The data from the EIA confounded market expectations for a rise of 275,000 barrels.

Heating fuel stocks are a key market focus because demand usually surges during the northern hemisphere winter.

Compared with a year ago, distillates stocks are 7.6 percent lower and crude reserves are down 5.9 percent.

"The market has advanced on continuing fears that the winter will see greater tightness in the market, a fear heightened by Wednesday's shocking EIA numbers," Bank of Ireland analyst Paul Harris said Friday.

He added that the disruption to Mexican oil exports on account of bad weather was prompting concerns that next week's data would show further declines to energy inventories in the United States.

At the start of the week, oil prices had actually slumped amid fears that a slowing US economy would dampen global demand for energy.