Oil Prices Rise to Record Above $96 a Barrel After Surprise Drop in US Supplies.
The price of oil rose to a new record above $96 a barrel Thursday after a surprise drop in U.S. crude stockpiles raised concerns about supplies for coming winter demand. Other energy futures also gained.
The U.S. Federal Reserve's move to cut interest rates by a quarter percentage point also supported prices.
It was the second week in a row the U.S. Energy Information Administration reported a sharp and unexpected drop in oil inventories. "The decline in U.S. crude oil inventories has been a key driver of oil prices," said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for December delivery rose as high as $96.24 a barrel in electronic trading on the New York Mercantile Exchange by late morning in Singapore. Prices later receded to $96.05 a barrel. Crude prices have reached inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to more than $101 today.
"We are stepping into an unknown area. Nobody wants to sell (given the fear of a) further rise," broker Ken Hasegawa of Fimat Japan told Dow Jones Newswires.
The December Nymex crude contract rose $4.15 Wednesday to a record settlement price of $94.53 a barrel. December Brent crude futures also surged to a new trading record of $91.63 a barrel Thursday on the ICE futures exchange in London, up $1 from the previous session.
In its weekly inventory report, the U.S. Energy Department's Energy Information Administration said oil supplies fell by 3.9 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 100,000 barrels.
"The report acted to solidify concerns about the possibility of tightening market conditions ahead of the northern winter," Moore said. Much of that decline was due to a big drop in crude supplies at a closely watched oil terminal in Cushing, Okla.
Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread, has given storage tank owners a financial incentive to sell their oil, rather than hold it in inventory. Analysts have also blamed falling Cushing supplies, in part, for the rally in which oil prices have jumped 35 percent since August.
The EIA also reported that refinery activity fell by 0.9 percentage point last week to 86.2 percent of capacity. Analysts had expected an increase of 0.5 percentage point. Supplies of gasoline rose last week by 1.3 million barrels. Analysts expected a 400,000-barrel decrease. And inventories of distillates, which include heating oil and diesel fuel, rose by 800,000 barrels. Analysts had expected a 1 million barrel decrease.
Also supporting oil futures was the U.S. central bank's move to cut interest rates. Interest rate cuts generally support oil prices because they tend to send the U.S. dollar downward; the dollar is already at multiple-decade lows against major currencies.
Oil futures have been driven to record levels in recent months partly because they offer a hedge against a weak dollar. Other energy futures followed oil's lead. Nymex December heating oil rose 2.65 cents to $2.558 a gallon, while December gasoline futures added 2.64 cents to $2.5697 a gallon. Natural gas futures advanced 7.6 cents to $8.406 per 1,000 cubic feet.
China Hikes Fuel Prices Amid Shortages
China Hikes Fuel Prices As Long Lines Form at Gas Pumps and Shortages Disrupt Trucking.
China raised gasoline and diesel prices Thursday to curb demand amid shortages that have caused long lines at filling stations and disrupted trucking in key export areas.
Oil companies have blamed the shortages, which began last week, on a lack of refining capacity. Government controls have forced refiners to pay the difference between soaring market prices for crude and lower retail prices at the pump. Some refiners responded by cutting output.
Consumers and some Chinese media have accused suppliers of creating a phony crisis to force Beijing to raise prices.
Thursday's 8 percent rise is meant to narrow the gap with soaring crude costs, according to the National Development and Reform Commission, the country's main planning agency. "To ensure the supply of domestic oil products and the promotion of energy conservation, the state decided to properly increase the prices of oil products," the NDRC said. The commission said the price rise also would apply to aviation fuel, and it also planned to raise natural gas prices but did not say when or by how much.
It was the first time in 18 months that Beijing has raised retail gasoline and diesel prices.
Trucking companies say diesel rationing has slowed deliveries in Shanghai and areas along China's southeast coast that export manufactured goods to the United States and other foreign markets. A man was killed in a fight Wednesday after he tried to cut in line for gas in the central province of Henan, police said.
Thursday's price increase marked the reversal of a September government order that froze prices of gasoline and other basic consumer goods to rein in rising inflation.
The commission said it would try to shield the public from some of the increases. "Prices of railway tickets, natural gas for civilian use and public transportation will not be raised to reduce the impact of the price hikes on the public, and the government will provide subsidies for taxi drivers," the commission said.
Chinese oil refiners are losing money due to low government-set retail prices for gasoline and diesel that prevent them from passing on record-high crude costs to consumers. Oil prices rose to new records above $96 a barrel in Asian trading Thursday.
Some refineries have stopped processing to avoid losses. It was unclear whether the price increase would be big enough to make refiners profitable and open to increasing production.
The government had resisted appeals by oil companies to boost prices, saying it wanted to avoid hurting China's poor, who already are struggling with a sharp rise in food costs. After Thursday's increase, Chinese motorists will pay about $3.20 per gallon for gasoline. Diesel prices rose to about $2.69 a gallon.
The NDRC said the price hike was likely to add 0.05 percent to the country's monthly consumer inflation rate. Inflation hit an 11-year monthly high of 6.5 percent in August. It eased to 6.2 percent in September, but the full-year rate is expected to be well above the official target of 3 percent.
China's No. 2 oil company, China Petroleum & Chemical Corp., known as Sinopec, defended its supply efforts Wednesday, saying in a statement that producers were "painstakingly organizing resources to get them to market" and also importing fuel. Sinopec said it would import more oil this month to "stabilize the domestic market" but gave no information on when the crunch might ease.
China has risen in recent years to become the world's second-biggest oil consumer after the United States, propelled by economic growth that is expected to top 10 percent this year for a fifth straight year. Government oil companies have spent billions of dollars to secure access to foreign oil and gas, leading to criticism of their willingness to deal with such isolated governments as Iran and Sudan.
Sinopec acknowledged that refiners that have suspended operations due to rising costs were partly to blame for the shortages. But it said they also were caused by mounting demand.
The price of oil rose to a new record above $96 a barrel Thursday after a surprise drop in U.S. crude stockpiles raised concerns about supplies for coming winter demand. Other energy futures also gained.
The U.S. Federal Reserve's move to cut interest rates by a quarter percentage point also supported prices.
It was the second week in a row the U.S. Energy Information Administration reported a sharp and unexpected drop in oil inventories. "The decline in U.S. crude oil inventories has been a key driver of oil prices," said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for December delivery rose as high as $96.24 a barrel in electronic trading on the New York Mercantile Exchange by late morning in Singapore. Prices later receded to $96.05 a barrel. Crude prices have reached inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to more than $101 today.
"We are stepping into an unknown area. Nobody wants to sell (given the fear of a) further rise," broker Ken Hasegawa of Fimat Japan told Dow Jones Newswires.
The December Nymex crude contract rose $4.15 Wednesday to a record settlement price of $94.53 a barrel. December Brent crude futures also surged to a new trading record of $91.63 a barrel Thursday on the ICE futures exchange in London, up $1 from the previous session.
In its weekly inventory report, the U.S. Energy Department's Energy Information Administration said oil supplies fell by 3.9 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 100,000 barrels.
"The report acted to solidify concerns about the possibility of tightening market conditions ahead of the northern winter," Moore said. Much of that decline was due to a big drop in crude supplies at a closely watched oil terminal in Cushing, Okla.
Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread, has given storage tank owners a financial incentive to sell their oil, rather than hold it in inventory. Analysts have also blamed falling Cushing supplies, in part, for the rally in which oil prices have jumped 35 percent since August.
The EIA also reported that refinery activity fell by 0.9 percentage point last week to 86.2 percent of capacity. Analysts had expected an increase of 0.5 percentage point. Supplies of gasoline rose last week by 1.3 million barrels. Analysts expected a 400,000-barrel decrease. And inventories of distillates, which include heating oil and diesel fuel, rose by 800,000 barrels. Analysts had expected a 1 million barrel decrease.
Also supporting oil futures was the U.S. central bank's move to cut interest rates. Interest rate cuts generally support oil prices because they tend to send the U.S. dollar downward; the dollar is already at multiple-decade lows against major currencies.
Oil futures have been driven to record levels in recent months partly because they offer a hedge against a weak dollar. Other energy futures followed oil's lead. Nymex December heating oil rose 2.65 cents to $2.558 a gallon, while December gasoline futures added 2.64 cents to $2.5697 a gallon. Natural gas futures advanced 7.6 cents to $8.406 per 1,000 cubic feet.
China Hikes Fuel Prices Amid Shortages
China Hikes Fuel Prices As Long Lines Form at Gas Pumps and Shortages Disrupt Trucking.
China raised gasoline and diesel prices Thursday to curb demand amid shortages that have caused long lines at filling stations and disrupted trucking in key export areas.
Oil companies have blamed the shortages, which began last week, on a lack of refining capacity. Government controls have forced refiners to pay the difference between soaring market prices for crude and lower retail prices at the pump. Some refiners responded by cutting output.
Consumers and some Chinese media have accused suppliers of creating a phony crisis to force Beijing to raise prices.
Thursday's 8 percent rise is meant to narrow the gap with soaring crude costs, according to the National Development and Reform Commission, the country's main planning agency. "To ensure the supply of domestic oil products and the promotion of energy conservation, the state decided to properly increase the prices of oil products," the NDRC said. The commission said the price rise also would apply to aviation fuel, and it also planned to raise natural gas prices but did not say when or by how much.
It was the first time in 18 months that Beijing has raised retail gasoline and diesel prices.
Trucking companies say diesel rationing has slowed deliveries in Shanghai and areas along China's southeast coast that export manufactured goods to the United States and other foreign markets. A man was killed in a fight Wednesday after he tried to cut in line for gas in the central province of Henan, police said.
Thursday's price increase marked the reversal of a September government order that froze prices of gasoline and other basic consumer goods to rein in rising inflation.
The commission said it would try to shield the public from some of the increases. "Prices of railway tickets, natural gas for civilian use and public transportation will not be raised to reduce the impact of the price hikes on the public, and the government will provide subsidies for taxi drivers," the commission said.
Chinese oil refiners are losing money due to low government-set retail prices for gasoline and diesel that prevent them from passing on record-high crude costs to consumers. Oil prices rose to new records above $96 a barrel in Asian trading Thursday.
Some refineries have stopped processing to avoid losses. It was unclear whether the price increase would be big enough to make refiners profitable and open to increasing production.
The government had resisted appeals by oil companies to boost prices, saying it wanted to avoid hurting China's poor, who already are struggling with a sharp rise in food costs. After Thursday's increase, Chinese motorists will pay about $3.20 per gallon for gasoline. Diesel prices rose to about $2.69 a gallon.
The NDRC said the price hike was likely to add 0.05 percent to the country's monthly consumer inflation rate. Inflation hit an 11-year monthly high of 6.5 percent in August. It eased to 6.2 percent in September, but the full-year rate is expected to be well above the official target of 3 percent.
China's No. 2 oil company, China Petroleum & Chemical Corp., known as Sinopec, defended its supply efforts Wednesday, saying in a statement that producers were "painstakingly organizing resources to get them to market" and also importing fuel. Sinopec said it would import more oil this month to "stabilize the domestic market" but gave no information on when the crunch might ease.
China has risen in recent years to become the world's second-biggest oil consumer after the United States, propelled by economic growth that is expected to top 10 percent this year for a fifth straight year. Government oil companies have spent billions of dollars to secure access to foreign oil and gas, leading to criticism of their willingness to deal with such isolated governments as Iran and Sudan.
Sinopec acknowledged that refiners that have suspended operations due to rising costs were partly to blame for the shortages. But it said they also were caused by mounting demand.
1 comment:
Re: “... the U.S. dollar ... is already at multiple-decade lows against major currencies.”
A “Federal Reserve Note” is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as having the value of 1/42.2222 fine troy ounces of gold.
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