BBC NEWS | Business |
1 April, 2005, 21:50 GMT 22:50 UK
Oil prices surge to new records
Oil traders say the ratio of global supply to demand is tight
Crude oil prices hit record levels on Friday, with leading investment
bank Goldman Sachs warning the cost of a barrel could eventually top
$100.
Goldman Sachs said that the oil market may be in the early stages of
a "super spike", which could push prices as high as $105 a barrel.
It said strong global demand, allied to potential instability in oil
producing countries, could inflate prices.
US light crude rose as much as $2.40 to $57.70 a barrel in New York.
By the close, the price had slipped back to $57.27 a barrel.
The previous high was $57.60, set on 17 March.
In London, the benchmark contract of Brent crude climbed $2.22, or
4.1%, to $56.51 a barrel.
"There are real concerns about product availability, that's what is
underpinning the strength of the market at the moment," said Kevin
Norrish, an analyst at Barclays Capital.
Consumption effect
The last time prices were at these levels, economists highlighted the
potential dangers to global economic growth and inflation.
Oil production cartel Opec was prompted to lift production quotas by
500,000 barrels a day.
In its report, Goldman Sachs said the possibility of political
turmoil in major oil producers such as Saudi Arabia could lead to a
significant rise in prices over the long-term.
The fundamental situation is not nearly as bad as what current oil
prices would suggest
David de Garis, ANZ Investment Bank
US light, crude oil price
Brent crude oil price
The firm has raised its average US price forecasts for 2005 and 2006
to $50 and $55 a barrel from $41 and $40 respectively.
"Oil markets may have entered the early stages of what we have
referred to as a 'super spike' period," said Goldman Sachs analyst
Arjun Murti.
This would result in "a multi-year trading band of oil prices high
enough to meaningfully reduce energy consumption and recreate a spare
capacity cushion only after which will lower prices return".
Tight supply
Prices have remained above $55 a barrel in recent days after data
showed that US gasoline stocks fell last week while demand was 2%
higher than this time last year.
Markets are also nervous about disruptions to supply after the recent
fatal explosion at BP's largest refinery in the United States and a
power failure which caused the closure of a Venezuelan refinery on
Thursday.
However, other analysts said it would require a major disruption in
supply to cause a spike in prices of such magnitude.
"The market is still of the mind that supply/demand is still very
tight but the fundamental situation is not nearly as bad as what
current oil prices would suggest," said David de Garis, an economist
at ANZ Investment Bank.
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