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Oil prices hit US$90 milestone
Source: Agencies |
December 8, 2010, Wednesday
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OIL prices yesterday jumped above US$90 a barrel for the first time in more than two years, a key milestone for Wall Street analysts who say tightening supplies will eventually drive prices above the US$100 mark next year.
The recent surge in oil pushed gasoline and other fuel prices higher as well. Average heating oil and diesel prices are expected to increase year-over-year for the first time since 2008, and the Oil Price Information Service said gasoline prices may hit a national average of US$3 per gallon before Christmas day.
The price increases probably won't be enough to affect holiday shopping, but U.S. consumers will eventually pull back on spending at the start of 2011, OPIS chief oil analyst Tom Kloza said.
"This sets up a very shaky January," Kloza said. "People are still going to drive to grandma's house. They're going to take it out on the economy later."
Overnight, the national average pump price added less than a penny to US$2.958 a gallon, according to OPIS, auto club AAA and Wright Express. A gallon of unleaded is 11 cents higher than it was a month ago and 32.6 cents higher than it was a year ago.
Kloza said gasoline could rise to between US$3.25 and US$3.50 a gallon by spring.
Benchmark oil for January delivery gave up 69 cents to settle at US$88.69 a barrel yesterday on the New York Mercantile Exchange. The contract hit US$90.76 a barrel earlier in the day, the highest price since Oct. 8, 2008.
Oil prices had been relatively stable for more than a year, wavering mostly between US$70 and US$80 per barrel. They've moved higher since the Federal Reserve announced plans to inject US$600 billion into the economy. Prices crossed the US$90 mark early yesterday as President Obama and Republican leaders hammered out an agreement to extend Bush-era tax cuts. A cold snap also swept through Europe and the U.S., lifting demand for fuel.
Wall Street analysts now predict that oil will hit US$100 per barrel sometime next year. They point to rising demand from China and other emerging economies. OPEC countries can crank up production to meet that demand now, but their ability to do that is expected to decline over the next few years.
Morgan Stanley estimates that spare production capacity will be cut in half in two years, falling to levels seen in 2007 and 2008, once again raising tensions about supplies and the world's thirst for oil.
Already, the International Energy Agency notes that supertankers are storing less oil offshore, and experts predict supplies will tighten elsewhere.
Independent analyst Jim Ritterbusch said Saudi Arabia and other OPEC members may increase production if oil grows any more expensive. Higher energy prices can stifle economic growth and force consumers to conserve fuel and turn to alternative energy sources. "They don't want high prices to create another crash in consumption," Ritterbusch said of OPEC. "They want stability."
In other Nymex trading in January contracts, heating oil fell less than a penny to settle at US$2.4702 a gallon, gasoline futures gave up 1.87 cents to settle at US$2.323 a gallon and natural gas lost 9.5 cents to settle at US$4.393 per 1,000 cubic feet.
In London, Brent crude fell 6 cents to settle at US$91.39 a barrel on the ICE Futures exchange.
The recent surge in oil pushed gasoline and other fuel prices higher as well. Average heating oil and diesel prices are expected to increase year-over-year for the first time since 2008, and the Oil Price Information Service said gasoline prices may hit a national average of US$3 per gallon before Christmas day.
The price increases probably won't be enough to affect holiday shopping, but U.S. consumers will eventually pull back on spending at the start of 2011, OPIS chief oil analyst Tom Kloza said.
"This sets up a very shaky January," Kloza said. "People are still going to drive to grandma's house. They're going to take it out on the economy later."
Overnight, the national average pump price added less than a penny to US$2.958 a gallon, according to OPIS, auto club AAA and Wright Express. A gallon of unleaded is 11 cents higher than it was a month ago and 32.6 cents higher than it was a year ago.
Kloza said gasoline could rise to between US$3.25 and US$3.50 a gallon by spring.
Benchmark oil for January delivery gave up 69 cents to settle at US$88.69 a barrel yesterday on the New York Mercantile Exchange. The contract hit US$90.76 a barrel earlier in the day, the highest price since Oct. 8, 2008.
Oil prices had been relatively stable for more than a year, wavering mostly between US$70 and US$80 per barrel. They've moved higher since the Federal Reserve announced plans to inject US$600 billion into the economy. Prices crossed the US$90 mark early yesterday as President Obama and Republican leaders hammered out an agreement to extend Bush-era tax cuts. A cold snap also swept through Europe and the U.S., lifting demand for fuel.
Wall Street analysts now predict that oil will hit US$100 per barrel sometime next year. They point to rising demand from China and other emerging economies. OPEC countries can crank up production to meet that demand now, but their ability to do that is expected to decline over the next few years.
Morgan Stanley estimates that spare production capacity will be cut in half in two years, falling to levels seen in 2007 and 2008, once again raising tensions about supplies and the world's thirst for oil.
Already, the International Energy Agency notes that supertankers are storing less oil offshore, and experts predict supplies will tighten elsewhere.
Independent analyst Jim Ritterbusch said Saudi Arabia and other OPEC members may increase production if oil grows any more expensive. Higher energy prices can stifle economic growth and force consumers to conserve fuel and turn to alternative energy sources. "They don't want high prices to create another crash in consumption," Ritterbusch said of OPEC. "They want stability."
In other Nymex trading in January contracts, heating oil fell less than a penny to settle at US$2.4702 a gallon, gasoline futures gave up 1.87 cents to settle at US$2.323 a gallon and natural gas lost 9.5 cents to settle at US$4.393 per 1,000 cubic feet.
In London, Brent crude fell 6 cents to settle at US$91.39 a barrel on the ICE Futures exchange.
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