SINGAPORE (Thomson Financial) - Crude oil traded near new all-time highs
above $124 a barrel on Friday even after the OPEC cartel insisted the market is
well-supplied and being driven by speculators.
Analysts said OPEC's view has already been factored into prices.
New York's main oil futures contract, light sweet crude for June delivery,
rose 62 cents to $124.31 a barrel in Asian trade after closing at a record
$123.69 on Thursday at the New York Mercantile Exchange.
In after-hours deals, the New York futures contract soared to an all-time
high of $124.57.
Brent North Sea crude for June delivery was 78 cents higher at $123.62 a
barrel.
In London on Thursday the contract crossed $123 for the first time and
jumped to a new intraday peak of $123.87 before settling at a record $122.84.
Oil prices have smashed one record after another in recent days.
"The oil market is so overwhelmingly bullish at this point ... it is looking
at the $125 mark as its next target," said Victor Shum, senior principal at
Purvin and Gertz energy consultancy in Singapore.
OPEC Secretary General Abdalla Salem El-Badri said on Thursday that there
was no shortage of crude oil, brushing aside U.S. calls for higher output to
dampen runaway prices.
"There is clearly no shortage of oil in the market," he said.
David Moore, a commodity strategist at the Commonwealth Bank of Australia in
Sydney, said El-Badri was reiterating OPEC's view and "his words are not a
surprise to the market."
Moore said OPEC's stance has already been factored into market prices.
The 13-member Organisation of the Petroleum Exporting Countries produces
about 40 percent of the world's oil, with current output at about 32 million
barrels per day.
El-Badri also maintained OPEC's stance that oil-market volatility has been
driven by financial market developments and the increased flow of speculative
funds into oil futures.
"The turmoil in some global equity markets and the considerable depreciation
in the U.S. dollar have encouraged investors to seek better returns in
commodities, particularly in the crude oil futures market. This has driven
prices higher," he said.
Shum agreed the bull run in crude has been driven by "investor interest" in
commodities.
Venezuela, a key member of OPEC, said on Thursday its proven crude oil
reserves had swelled to 130 billion barrels as of late April, marking a rise of
30 billion from its prior estimate.
Shum said the increase in Venezuela's reserves will not have much impact on
the market's bullish sentiment.
"The increase in reserves does not mean that there will be an increase in
output," he said. "No bearish news can dampen its momentum."
European Central Bank (ECB) chief Jean-Claude Trichet warned on Thursday
that inflation is a serious problem for the 15-nation eurozone and said people
should get used to higher energy prices.
"As we have said on previous occasions, inflation rates are expected to
remain high for a rather protracted period of time," Trichet stressed after ECB
governors left the bank's benchmark lending rate at 4.0 percent.
"While the U.S. Federal Reserve has tried to keep the wheels of the capital
markets greased with lower and lower interest rates, the European Central Bank
has remained resolute is guarding against inflation, and the dollar has suffered
mightily, as a result, generating the steep climb in energy and food prices,"
said John Kilduff at MF Global.
A weakening U.S. dollar makes oil cheaper for buyers using stronger
currencies.
Analysts said oil prices have also been buoyed by continuing violence in
Nigeria, Africa's largest crude oil producer, where attacks have cut production
by about a quarter over the past two years.
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