AP
Oil Prices Rise to New Record in Asia
Wednesday November 21, 1:18 am ET
By Gillian Wong, Associated Press Writer
Crude Oil Prices Rise to New Record Above $99 Barrel in Asian Trading As Traders Eye $100 Mark


SINGAPORE (AP) -- Crude oil prices rose to a record above $99 a barrel in Asian trading Wednesday, lifted by worries about inadequate supplies as the Northern Hemisphere enters winter and on news of refinery problems.

The declining U.S. dollar and speculation that the U.S. Federal Reserve will again cut interest rates also boosted prices. Some investors put their money into oil contracts, betting that gains in their price will offset dollar weakness.

"The market is now really looking at $100 a barrel as the next target to hit," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The fact that we are having this surge in pricing in this short trading week underscores the strength of this bull run for oil."

Light, sweet crude for January delivery rose as high as $99.29 a barrel in electronic trading on the New York Mercantile Exchange, breaking the previous intraday record of $98.62 set last week. Midday in Singapore, oil was trading at $99.04 a barrel.

The contract surged $3.39 during the floor session Tuesday in New York to a record close of $98.03 a barrel. The Nymex will be closed Thursday for Thanksgiving and close early on Friday.

Energy futures got a boost on news of problems at two oil facilities Tuesday. A Valero Energy Corp. refinery in Memphis, Tenn., that processes 180,000 barrels of crude a day has shut down for 10 days of unplanned maintenance. Also, a Royal Dutch Shell PLC plant that converts bitumen from Alberta's oil sands region into 155,000 barrels a day of synthetic crude oil was temporarily shut down due to a fire.

Beyond these temporary concerns, investors are anxious that as global demand for energy grows, fueled by China and India's rapid development, oil supplies won't be able to keep up.

Currently, oil producers are turning out about 85 million barrels a day, while the U.S. Department of Energy says consumption is between 85 million and 86 million barrels a day.

"The long-term underlying trend is that demand is powering forward and the supply situation looks tight," said Jeff Brown, managing director and chief economist at FACTS Global Energy in Singapore.

Oil prices also got support after the Fed said it thinks U.S. economic growth will slow next year to between 1.8 percent and 2.5 percent, less than the Fed's previous projections. It also projected that U.S. inflation should fall next year to between a 1.8 percent and 2.1 percent increase.

That could mean the Fed will cut interest rates further, and that could weigh on the dollar. On Tuesday, the euro hit an all-time high against the dollar, breaking through the $1.48 mark.

"When the U.S. dollar hit a record low, oil also surged ahead. It's been an inverse relationship," Shum said. "Also, the Fed indicating worries about the U.S. economy has caused worry that the Fed will cut interest rates."

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Oil product prices also rose. December heating oil futures were up 1.59 cents at $2.7060 a gallon after closing in New York at $2.6901 a gallon, a record settlement. Gasoline prices added 1.4 cents to $2.4655 a gallon.

Traders were also closely watching for the release of Wednesday's petroleum inventory report from the U.S. Energy Department's Energy Information Administration.

Analysts surveyed by Dow Jones Newswires, on average, predict that crude oil inventories rose by 800,000 barrels last week, while refinery use grew by 0.4 percentage point to 88.1 percent of capacity.

Gasoline likely grew by 700,000 barrels, the analysts predicted, while inventories of distillates, which include heating oil and diesel fuel, fell by 400,000 barrels.

Natural gas futures rose 3.9 cents to $7.516 per 1,000 cubic feet.