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| Sunday, 10 October 2004 |
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Global oil prices on the up Oil prices increased to $ 52 on Thursday (October 07) due to an increase in demand due to the approaching winter and supply distruptions as a result of a strike in Mexico. It is forecast that it will increase upto $ 55 a barrel in the near future. Oil prices darted above $51 a barrel Tuesday as output in the Gulf of Mexico remains in shambles more than two weeks after Hurricane Ivan tore through the region. Even as the advance in crude futures begins to appear unstoppable, with traders saying $55 a barrel seems possible, some analysts are convinced that a speculative bubble has formed. They say prices have become inflated as institutional investors, such as hedge funds and mutual funds, pile on bets in the energy markets. Light crude for November delivery soared $1.18 Tuesday on the New York Mercantile Exchange to settle at $51.09 a barrel - the highest level in the exchange's history. "Oil has become the only game in town," said Fadel Gheit, Senior Vice President of Oil and Gas Research at Oppenheimer & Co. in New York. "Every other investment vehicle has been disappointed over the last 12 months." Scattered reports of 20-cent-per-gallon increases in gasoline prices in the Indianapolis area were not reflected in the average price reported by the AAA Hoosier Motor Club. AAA said the average price of regular unleaded fuel in metropolitan Indianapolis inched up to $1.88 per gallon Tuesday from a $1.86 on Monday. The statewide average was $1.91 per gallon. A year ago, a gallon of regular unleaded cost was an average of $1.48 in Indiana. Rising gas prices run counter to what usually happens this time of year, said Greg Seiter, a spokesman for AAA. "Typically, this is when we would see a reduction in price," he said. "The summer driving season is over. The days are shorter and people are driving less. The onslaught of hurricanes has reversed (the trend)." On the national scene, disappointment over stock market returns isn't the only factor driving institutional investors to energy futures. Ed Silliere of Energy Merchant Corp. in New York said fund managers are more worried that a major supply disruption in the Middle East, caused by terrorism or anything else, would cause oil prices to reach a level that would wreak havoc in the global economy and devalue most of their investments. Tuesday's price surge came as traders remained nervous about violence in oil-producing giants such as Nigeria and Iraq and concerned about the slow pace of recovery in Gulf of Mexico oil output. BP PLC said Tuesday that its daily output in the gulf region is nearly 57 percent below normal and that it does not expect production to be fully restored until the end of the month. Oil production in the gulf is more than 3 million barrels per week below average, putting U.S. crude inventories at historically tight levels and placing extra importance on imports at a time when the market is already nervous about possible supply disruptions around the globe. |
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