abce certificate
Monday, 01 December, 2008, 22:10 GMT | more >>

Oil settles higher on cold, unrest



By Upstream staff 

Photo by Reuters


Oil prices closed higher today, driven by a rise in heating oil demand and the movement of Turkish troops into Iraq.

Early trading see-sawed amid economic growth concerns and rising US crude oil and gasoline inventories and supply worries related to an incursion into Iraq by Turkish troops.

Nymex crude rose 58 cents, or 0.59%, to settle at $98.81 a barrel, after trading from $97.16 to $99.37.

Meanwhile, Nymex March natural gas futures hit a two-year high, backed by an upside reversal in crude oil prices and cold weather forecast for the US north-east and mid-west for the next week.

Gas futures rallied 27.5 cents, or 3%, to $9.166 per million British thermal units, the highest level for a spot contract since 1 February 2006.

The move eclipsed Wednesday's run to another two-year spot continuation chart high of $9.12.

Traders, noting April through October also set new contract highs Friday, said recent strong draws from storage during a chilly winter have helped whittle down gas inventories and turn the price outlook for 2008 more supportive.

Oil's March contract hit a record high of $101.32 on Wednesday, taking it near its all-time inflation-adjusted high of $102.53 hit in April 1980, boosted by a tide of investor cash chasing commodities as a safer investment option at a time of rising inflation and overall market turmoil.

However, prices fell yesterday after official US data showed a sharp 4.2 million barrel build in crude stockpiles last week, the sixth straight week of gains and nearly double forecasts, and gasoline stocks also rose to a 14-year high.

Analysts said the data showed US consumers were struggling with high pump prices and heightened fears of a recession in the economy roiled by a credit crunch and a housing slump.

But continuing demand strength in China and India is likely to keep oil well supported through any slowdown in the west, as are threats to supplies from Africa and the Middle East.

Thousands of Turkish troops crossed into northern Iraq in their hunt for Kurdish PKK guerrillas, a senior military source told Reuters today, in an escalation of a conflict that could destabilise the region.

The surge in prices earlier this week came despite persistent concerns about the US economy and with it worries about oil demand.

Investment bank Merrill Lynch said the US is in a recession that could be much worse than it faced in 2001, and closer to the sharper economic slump of the 1990s.

"With oil demand growth risks skewed to the downside in the US we believe there is a growing risk that oil prices are now entering overbought territory," Deutsche Bank analysts said in a research note.

Oil has averaged $93.02 a barrel this year, up nearly a third on the average in 2007 of $72.30.


Friday, 22 February, 2008, 05:07 GMT  | last updated: Friday, 22 February, 2008, 20:08 GMT

Rolling in: Turkish troops in armoured vehicles patrol the Iraq-Turkey border last October PHOTO: AP
 

e-mail this article to a colleague


to email:  from:
comments: