Commodities

Thursday May 8, 05:31 AM
World oil prices strike fresh record - UPDATE

SINGAPORE (Thomson Financial) - World (WRGR.TA - news) oil prices continued their daily record-breaking run on Thursday, reaching a fresh intraday peak near $124 dollars a barrel despite a larger-than-expected rise in U.S. crude stocks.

The record of $123.87 reached by New York's main oil futures contract, light sweet crude for June delivery, slightly exceeded the old intraday high of $123.80 reached on Wednesday at the New York Mercantile Exchange.

The contract later traded six cents lower at $123.47 a barrel in Asia from its record close of $123.53 in New York.

Brent North Sea crude for June delivery was seven cents lower at $122.25 a barrel.

In London on Wednesday the contract touched an all-time peak of $122.70, before settling up $2.01 dollars at $122.32.

Oil prices crashed through records every day this week, jumping at least $7.00.

'Right now the market is trading by momentum as market participants tend to selectively focus on bullish news,' said Victor Shum, senior principal at Purvin and Gertz energy consultancy in Singapore.

'Heady prices point to a significant risk of a correction,' he said.

Some economists fear that surging oil prices could crimp U.S. economic growth, and Wall Street tumbled on Wednesday after the latest spike in oil prices. The Dow Jones Industrial Average of blue chips closed down 1.59 percent while the technology-laden Nasdaq composite (NASDAQ: news) finished down 1.80 percent.

The United States is the world's biggest oil importer, which has been threatened by a long-running housing market slump and a related credit squeeze.

Oil prices continued their gains despite a weekly survey by the US government showing that the country's crude stocks rose by 5.7 million barrels to 325.6 million barrels for the week ended May 2.

But Shum said that while the inventory report showed an unexpectedly large crude gain, many market participants zeroed in on draws in distillates, which include diesel and heating oil, and which provided the momentum for a strong close.

Traders said a combination of forces have pushed prices higher, including market speculators and a decision by the Organisation of the Petroleum Exporting Countries cartel not to hike output quotas.

Prices have also been buoyed by ongoing violence in Nigeria, Africa's largest producer, traders said. Attacks have cut Nigeria's oil production by about a quarter over the past two years.

Angst over oil prices has also been stirred by continuing diplomatic tensions over Iran's nuclear ambitions, which Tehran says are peaceful. Iran is OPEC's second-largest producer.

'Issues with supply in Iran and Nigeria... have already been taken into account in current pricing,' said Shum.

U.S. investment firm Goldman Sachs (NYSE: GS - news) forecast on Tuesday that world oil prices could strike $200 a barrel within two years.

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