Crude oil futures surge to $112 per barrel, on lower-than-expected U.S. inventories

www.chinaview.cn 2008-04-10 07:57:25

NEW YORK, April 9 (Xinhua) --

Crude futures set new record high Wednesday after the U.S. government reported lower-than-expected inventories.

Light, sweet crude oil futures for May delivery surged 2.37 U.S. dollars to 110.87 dollars a barrel on the New York Mercantile Exchange after setting a new intraday high of 112.21 dollars.

May gasoline futures rose 2.38 cents to 2.7742 dollars a gallon, approaches the record futures price of 2.925 dollars set in 2005 when Hurricane Katrina struck New Orleans.

"Crude continued on its uptrend today and at one point touching a record 112.21 dollars per barrel," Wall Street Strategies' senior research analyst Conley Turner told Xinhua.

"The primary catalyst for the move up had to do with a report from the Energy Information Administration (EIA), which showed that crude oil supplies fell by 3.2 million barrels in the past week. This is in stark contrast to the consensus expectation for an actual increase of 2.4 million barrels."

Crude oil inventories fell to 316 million barrels last week, the first decline since February, according to the Energy Department. Supplies of gasoline and distillate fuel, including heating oil and diesel, also fell.

"In general, oil prices continue to be elevated in large measure to the weakness of the U.S. dollar," said Turner.

"Oil has an inverse relationship with the value of the dollar and many investors view this and other commodities as a hedge against a declining value of the dollar and against inflation. Additionally, a declining U.S. currency makes oil less expensive to international investors," he explained.

Outlook of high prices

For the first time, the EIA on Tuesday raised its full-year forecast for U.S. light crude to more than 100 dollars a barrel.

The agency expects the benchmark West Texas Intermediate contract would average 101 dollars per barrel this year, much higher than its earlier predicted prices of 94 dollars.

Despite softening demand, the world oil market would remain tight this year as production increases from both the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries will likely fall short of projections, said the EIA. U.S. economy would not be enough to check soaring oil demand.

"While the outlook for the price is higher in the long term, the short term moves convey a bit of speculation," said Turner.

"This is especially the case in light of widespread expectationof another rate cut by the Federal Reserve. This move is likely toput further downward pressure on the dollar and upward thrust on oil prices," he added.

Editor: Sun Yunlong

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