Inventories fall pushes oil above $96
Friday, 2 November 2007
Javier Blas
FT Syndication Service
LONDON: Oil held above the $95 level at the end of morning trade in London on Thursday after crude prices hit a nominal record above $96 a barrel in after-hours trading on Wednesday following a sharp drop in US inventories that left them at their lowest level in two years.
The US department of energy reported that crude oil inventories fell 3.9m to 312.7m in the week ending last Friday. That is the lowest level since October 2005, when the US oil industry was recovering from the impact of hurricanes Rita and Katrina.
The tight state of global energy markets was underlined by data from Japan where oil inventories also fell last week to 97.9m barrels, the lowest since early 2006 and 16 per cent below last year's level.
The International Energy Agency, the energy watchdog of the west, has warned that declines in crude oil stocks show the market needs more supplies.
ICE December Brent traded 44 cents higher at $91.07.
Dollar weakness following a further reduction in US interest rates by the Federal Reserve on Wednesday was a key factor in helping to push oil prices higher.
Oil's rally came a day after Goldman Sachs, Wall Street's most bullish investment bank on crude, recommended investors take profits and this helped drag prices down by more than $3 a barrel on Tuesday, the largest one-day fall this year.
The cost of buying insurance against WTI reaching to the $100 level in the next two weeks through call options - contracts that give the right to buy oil at a predetermined price - jumped 150 per cent to 93 cents per barrel. Trading in call options has been one of the key drivers of the recent price spike, analysts said.
The inventory fall was particularly acute at the market-sensitive location of Cushing, Oklahoma, the delivery point for the Nymex contract, were crude oil stocks fell 3.1m barrels on the week to 15.1m, almost 35 per cent below the level this time last year.
FT Syndication Service
LONDON: Oil held above the $95 level at the end of morning trade in London on Thursday after crude prices hit a nominal record above $96 a barrel in after-hours trading on Wednesday following a sharp drop in US inventories that left them at their lowest level in two years.
The US department of energy reported that crude oil inventories fell 3.9m to 312.7m in the week ending last Friday. That is the lowest level since October 2005, when the US oil industry was recovering from the impact of hurricanes Rita and Katrina.
The tight state of global energy markets was underlined by data from Japan where oil inventories also fell last week to 97.9m barrels, the lowest since early 2006 and 16 per cent below last year's level.
The International Energy Agency, the energy watchdog of the west, has warned that declines in crude oil stocks show the market needs more supplies.
ICE December Brent traded 44 cents higher at $91.07.
Dollar weakness following a further reduction in US interest rates by the Federal Reserve on Wednesday was a key factor in helping to push oil prices higher.
Oil's rally came a day after Goldman Sachs, Wall Street's most bullish investment bank on crude, recommended investors take profits and this helped drag prices down by more than $3 a barrel on Tuesday, the largest one-day fall this year.
The cost of buying insurance against WTI reaching to the $100 level in the next two weeks through call options - contracts that give the right to buy oil at a predetermined price - jumped 150 per cent to 93 cents per barrel. Trading in call options has been one of the key drivers of the recent price spike, analysts said.
The inventory fall was particularly acute at the market-sensitive location of Cushing, Oklahoma, the delivery point for the Nymex contract, were crude oil stocks fell 3.1m barrels on the week to 15.1m, almost 35 per cent below the level this time last year.