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Latest Headlines
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Jun 17, 2008 4:53:00 AM MST
Crude oil price pulls back in volatile trading: `uptrend remains intact` (Oil-Prices)
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NEW YORK _ Oil prices eased a day after hitting a trading record of nearly US$140 a barrel as investors weighed increased production from Saudi Arabia against the ability to supply developing countries.
Light sweet crude for July delivery shed $1.79 to $132.82 a barrel on the New York Mercantile Exchange.
Crude prices had gyrated Monday, rising sharply to a record $139.89 per barrel before tumbling to under $133 and settling at $134.61, off 25 cents on the day.
"Price swing of $5 per barrel isn´t unusual anymore. The issue really is global oil demand is growing at a reasonable pace and supply is still playing a catch-up game," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"Further into summer, there are still opportunities for further price spike. The overall uptrend in oil pricing remains intact."
Other factors supporting high oil prices included the European Union´s plan Monday to impose new energy-industry sanctions on Iran to discourage it from developing nuclear weapons, he said.
Crude oil´s spike Monday was partly due to a weaker U.S. dollar, along with fears that a fire at a StatoilHydro rig in the North Sea could hit production.
Still, the market searched for the drivers behind the price swings. Analysts pointed to Saudi Arabia´s weekend decision to boost production and to Tuesday´s expiration of crude options, or agreements to buy or sell futures at higher or lower prices. Trading is often volatile ahead of options expiration.
Saudi Arabia, the world´s top oil exporter, has called a meeting of oil producing and consuming nations in Jeddah on Sunday to seek ways to tackle soaring oil prices.
Shum said the meeting isn´t likely to produce any concrete results. Saudi Arabia´s plan to raise its output by 200,000 barrels a day, or by two per cent, in June and July is also insignificant compared with global demand of 86 million barrels a day, and may hit the kingdom´s spare oil capacity, he said.
According to the International Energy Agency, OPEC spare capacity fell below two million barrels a day in May for the first time since 2006. The majority of that _ 1.45 million barrels a day _ was in Saudi Arabia.
"They can talk and increase supply a bit but for oil pricing to lower significantly, what the market needs is a noticeable demand destruction and we haven´t seen that yet," Shum said.
Demand has appeared to ease in the U.S. and other rich countries but remains strong in China and parts of Asia, he said.
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