Friday May 16, 07:04 AM
Oil prices higher in Asian trade amid tight global supply
SINGAPORE (Thomson Financial) - World (WRGR.TA - news) oil prices rose in Asian trade Friday amid tight global supplies and as investors
continued to buy into the commodity which has given better returns than bonds and equities.
In early afternoon trade, New York's main oil futures contract, light sweet crude for June delivery, was up 73 cents at $124.85 per barrel, off its record high of $126.98 a barrel on Tuesday.
London's Brent crude contract for July rose 76 cents to $123.39. The contract for June expired at the close on Thursday, settling at $122.77.
'The bullish enthusiasm in the market remains. The global oil market remains indeed structurally tight,' said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
'Even though demand growth is showing some weakness, supply growth is also not there. OPEC continues to restrain supply and production in non-OPEC states are not expected to be strong,' he said, referring to the Organisation of Petroleum Exporting Countries.
Because of the tightness in supply, 'the bullish psychology of the market is unlikely to change in the near-term,' Shum said.
The market is awash with speculative money ready to buy once prices dip to attractive levels, he said.
'Investors are likely to get into oil because oil has performed better than equities and bonds... There is money looking for better returns and oil is offering better returns.'
Shum said investors shrugged off the impact of an oil pipeline explosion in Nigeria, Africa's biggest crude exporter, which according to the Red Cross killed about 100 people.
Militants regularly attempt to sabotage oil industry infrastructure in Nigeria's Delta region, but a Red Cross official said the pipeline blast appeared to have been caused accidentally by a road construction crew.
Shum said there was 'considerable support' for prices above $120 a barrel, but there also appeared to be some resistance to breach $130.
'The near-term trading range is likely to be the within $120-130,' he said.
Prices have remained high even after OPEC trimmed its 2008 estimate of world oil demand growth, citing higher prices and slower economic momentum in major industrialised countries including the United States.
Global oil demand was projected to grow by 1.35 percent in 2008, compared with a previous estimate of 1.4 percent, OPEC said in a monthly survey.
Oil prices have surged since crashing through the $100-a-barrel barrier at the start of the year, with some analysts discussing the possibility of oil prices eventually hitting $200.
OPEC, which pumps about 40 percent of world oil supplies, has repeatedly insisted that the world market is well-supplied and that price spikes have been caused by speculators.
The OPEC report followed the release of an International Energy Agency survey on Tuesday which suggested growth in global oil demand will slow.
The IEA, an energy policy adviser to major industrialised countries, predicted that crude demand in 2008 would stand at 86.8 million barrels per day (bpd) -- about 390,000 bpd less than its previous estimate given in April.
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