Oil roars to record near $105 on OPEC, U.S. drawdown
NEW YORK (Reuters) - Oil rallied $5 to a record near $105 a barrel on Wednesday after OPEC decided to maintain output levels and government data showed a sharp draw in U.S. crude inventories.
U.S. crude futures settled up $5.00 at $104.52 a barrel, before extending gains to an all time high of $104.95 a barrel in late trade. London Brent crude settled $4.12 higher at $101.64 a barrel.
The gains came after weekly data from the U.S. Energy Information Administration showed U.S. crude inventories fell by 3.1 million barrels last week. U.S. gasoline stocks rose to hit the highest level in 14 years.
The crude draw countered analyst forecasts for a build and heightened supply concerns already stirred by OPEC earlier in the day.
"Traders were quick to reestablish long positions in the market today after OPEC kept production steady and, more importantly, the crude data showed an unexpected counter-seasonal draw," said Eric Wittenauer, analyst at AG Edwards in St. Louis.
OPEC members meeting in Vienna decided to hold production levels flat, insisting oil markets are well supplied and blaming record prices on factors outside the cartel's control, including speculators and the "mismanagement" of the U.S. economy.
"What's happening in the oil market is due to the mismanagement of the U.S. economy, which is probably affecting the rest of the world," said OPEC President Chakib Khelil.
U.S. Energy Secretary Sam Bodman said low inventories were to the main culprit behind high oil prices.
"They (OPEC members) see speculation in the market. I see a decline in global inventories and I think that is what's driving this," Bodman said.
A day earlier, President George W. Bush criticized the producer group for its handling of the market.
"I think it's a mistake to have your biggest customer's economy to slow down ... as a result of high energy prices," Bush said.
Speculators have piled into oil and other commodities as a hedge against the weaker dollar and inflation as the U.S. economy slows due to the credit crunch, the mortgage crisis and high energy costs.
Further support for oil prices came from escalating tensions in South America.
OPEC nation Venezuela said it deployed tanks and air and sea forces toward the Colombian border on Wednesday in its first major military mobilization of a crisis raising fears for regional stability.
The move came after Colombia's weekend raid inside another South American neighbor, Ecuador, to kill rebels in an operation that Venezuelan President Hugo Chavez, an ally of leftist Ecuadorean President Rafael Correa, says could spark war.
(Additional reporting by Maryelle Demongeot in Singapore, Randy Fabi in Vienna and Ikuko Kao in London; Editing by David Gregorio)
