Oil hits new high over $82 after Fed rate cut
NEW YORK (Reuters) - Oil surged to a peak over $82 a barrel on Tuesday, the fifth record in as many trading days, as a U.S. Federal Reserve decision to slash interest rates heightened concerns of a winter supply squeeze in the world's top energy consumer.
The move to cut benchmark interest rates by 50 basis points was more aggressive than some investors had expected and raised expectations the economy will weather the U.S. credit crisis, insulating industrial and retail demand for fuel.
"When the economy expands, so does oil demand," said Peter Beutel, president of Cameron Hanover in Connecticut.
U.S. crude surged $1.81 to a record $82.38 a barrel at 1720 GMT in electronic trade after settling up 94 cents at $81.51 in the regular session. London Brent crude was up 61 cents at $77.59.
Hurricane and other supply risks, shrinking U.S. fuel inventories and fund flows into energy from poorly performing equity markets have fueled a rally of more 30 percent in oil prices so far this year.
The Organization of the Petroleum Exporting Countries agreed last week to boost output by 500,000 barrels per day (bpd) from November, but the move has failed to soothe consumer concerns.
"The winter season will look remarkably tight," said Harry Tchilinguirian, senior oil market analyst at BNP Paribas. "The OPEC increase will fall short of the needs of the market come wintertime."
U.S. crude oil supplies are running at their lowest level in eight months while inventories of gasoline are at their lowest since Hurricane Katrina knocked out several oil refineries on the Gulf coast in 2005.
Some OPEC members say the exporters may have to pump more if oil stays above $80 for long.
"If the high price lasts, say, more than 15 to 20 days, there would at least be consultations between ministers. They'd have to do something about it," an OPEC source told Reuters.
Though crude prices have quadrupled since 2002, when adjusted for inflation the price is below the $90 peaks of the Iranian Revolution in 1979.
Goldman Sachs on Monday forecast U.S. oil prices would surge to $85 a barrel by the end of the year, up $13 from its previous forecast, and said crude could climb as high as $90 due to tight supplies.
U.S. oil supplies probably dropped again last week for the fourth straight week as imports shrank, said industry analysts polled by Reuters ahead of Wednesday's government data.
Forecasts called for a 2 million-barrel draw in crude stocks, a 700,000-barrel decline in gasoline stocks and a 1.3 million-barrel build in distillates, which include heating oil, ahead of peak winter heating demand in the Northern Hemisphere.
- Lost airliner was diverted deliberately: Malaysian PM |
- Malaysia PM says lost plane's movements indicate a deliberate act
- Exclusive: Radar data suggests missing Malaysia plane deliberately flown way off course - sources
- UPDATE 2-Satellite data shows missing Malaysia plane may have flown thousands of miles-source
- UPDATE 1-Rolls-Royce concurs with Malaysia on missing jet's engine data