OIL HITS RECORD $100

Agence France-Presse - 1/2/2008 6:55 PM
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Oil Hits Record 100 Dollars

The price of oil on Wednesday hit 100 dollars a barrel for the first time, providing a new jolt to oil-dependent economies, particularly the United States, dealers said.


On the New York Mercantile Exchange (Nymex) at 1720 GMT, a barrel of "light sweet crude" for February briefly hit 100 dollars per barrel before easing back, up 3.48 dollars to 99.46 dollars from Monday's close.

After flirting with the record twice in November, "we finally hit the 100 dollars barrel oil and we will hit again if supply remains tight compare to demand," said Bart Melek, an analyst with BMO Capital Markets.

In London, Brent North Sea crude for February soared to a record 97.05 dollars per barrel. It later stood at 96.85 dollars, up three dollars from Monday. Markets were closed Tuesday for the New Year holiday.

The surge in oil prices drove US stocks lower. "As crude rallies, stocks continue to slide. The decline is broad-based, considering all sectors other than energy (up 0.5 percent) are posting a loss of 1.0 percent or larger," analysts at Briefing.com wrote.

Phil Flynn, an analyst at Alaron Trading, explained the factors supporting crude prices: "More violence in Nigeria, concerns about stability in Pakistan, oil-inventory expectations and good old-fashioned cold winter weather."

At least 12 people were killed over the New Year in the Nigeria's oil capital Port Harcourt, raising fears that crude output in the oil-producing nation could be further reduced. Gunmen attacked two police stations and a hotel, a military officer in the city said on Wednesday.

"With the military and the militant warlords engaged in a violent tit-for-tat, the risk for oil disruptions in Nigeria remains higher than in the past few months," said Petromatrix analyst Olivier Jakob.

Violence by militants has reduced Nigeria's oil output by about a fifth since the start of 2006. The unrest "raises concerns that a return to chaos could begin to disrupt international oil flows again," said John Kilduff at MF Global.

Elsewhere, an official report due Thursday was expected to show that crude oil inventories in the United States, the world's top energy consumer, have fallen for a seventh week in a row. Falling inventories amid the northern hemisphere winter when demand for heating fuel surges is helping to lift prices.

"Crude prices are drawing some support from (expectations of) a further decline in crude stocks in a weekly US inventories report," said Sucden analyst Andrey Kryuchenkov.

"Oil stocks are near a three-year low, with more withdrawals expected in this Thursday's delayed inventory report," added Kilduff.

Oil prices doubled last year, with New York crude reaching a record high of 99.29 dollars on November 21.

New York prices had briefly approached 98 dollars late last week after the assassination of Pakistan opposition leader Benazir Bhutto.

David Moore, a commodities strategist with the Commonwealth Bank of Australia, said Wednesday that geopolitical tensions in Pakistan and the Middle East had "created a risk premium" for the oil market.