Crude oil price surges past US$55

Crude oil price surges past US$55

Associated Press, London

Crude oil prices surged past an unprecedented US$55 per barrel on Monday as uncertainty swirls over production, high demand and tight global supplies ahead of the Northern Hemisphere winter.

Crude for November delivery on the New York Mercantile Exchange hit US$55.33 per barrel in pre-opening electronic trading, up 40 cents from its Friday settlement price. By 1330GMT (8.30 p.m. Jakarta time) the contract had slipped back to US$54.75, down 18 cents. The November contract expires Wednesday.

Heating oil also hit a new peak Monday, while Brent crude for December delivery hit a high of US$50.32 on London's International Petroleum Exchange shortly after the trading session opened. By 1330GMT, Brent also had pulled back, down 13 cents from Friday's close to US$49.80.

However, analysts said the markets were volatile, recording large price swings over a weekly period, and prices are expected to rise again.

Crude oil prices are the highest in a generation, rising by around 80 percent from the beginning of 2004. However, even at current levels, crude oil prices are still about 40 percent below the all-time highs - in inflation-adjusted terms - of February 1981.

Prices have skyrocketed more than US$10 in the past month, primarily over production delays in the Gulf of Mexico, where Hurricane Ivan hit mid-September.

Now that the US$55 barrier has been surpassed, analysts are looking toward US$60 a barrel, with some saying it may reach that mark by the end of the year - smack in the middle of the Northern Hemisphere winter.

"We hit the new milestone and we're looking at US$60," said Victor Shum, oil analyst at Texas-headquartered energy consultants Purvin & Gertz. "US$60 is certainly feasible."

Axel Busch, the chief correspondent for Energy Intelligence Group in London, which plots energy developments, said the market was a little overheated and would likely pull back initially.

"But will we hit US$60? Yes, I think we probably will," he added.

Declines in U.S. distillate stocks just before the Northern Hemisphere winter are the latest in a line of supply factors to rattle the market.

The U.S. Energy Department said in its weekly petroleum supply report last week that commercially available supplies of heating oil declined by 1.2 million barrels for the week ending Oct. 8, falling to 50.0 million barrels, or 10 percent below year-ago levels.