New York crude bolts to record 55 dollars a barrel

NEW YORK (AFP) – New York’s main crude oil price bolted to a record 55 dollars a barrel as traders fretted about stretched supplies, hot demand and thin stocks of winter heating fuel.

New York’s benchmark contract, light sweet crude for delivery in November, shot to an unprecedented 55 dollars a barrel before closing at a record settlement of 54.93, up 17 cents on the day.

Brent North Sea crude for November hit 50.12 dollars but closed at 49.93 dollars, down 16 cents.

New York crude boomed as traders rode the momentum of a near 70-percent surge so far this year, Refco market analyst Marshall Steeves said.

“I think the momentum is going to keep it going for a while,” Steeves said.

Crude oil prices have soared on concerns that producers are pumping at near full capacity to meet voracious global demand, particularly from China and India, leaving no wriggle room for any supply interruptions.

Market fears deepened after a US government report Thursday showed commercial heating oil supplies dripping lower, Steeves said.

“Obviously as we move into late October and November, conditions will get colder in the northeast where most of the heating oil is consumed,” the analyst said.

Inventories of distillates — mostly diesel and heating oil — dropped 2.5 million barrels to 120.9 million in the week to October 8, the US Energy Department said.

“The market fears that the US is running out of time to build winter fuel supplies, which are also short in Europe and Asia,” analysts at the Sucden brokerage firm said in London.

High oil prices should have a more muted impact on US economic growth and inflation than the 1970s oil shock, however, Federal Reserve chairman Alan Greenspan said in a speech here.

But the harm could intensify if oil prices moved “materially higher,” he warned.

The Federal Reserve boss said in a speech here that he believed “part of the recent rise in spot prices is expected to wash out over the longer run.”

“In a round-about way Alan Greenspan kind of gave the green light for prices to go higher,” by making the case that the economy could withstand rising energy costs, said Alaron Trading analyst Phil Flynn.

Citigroup chief North American economist Robert DiClemente was less sanguine about the oil price surge’s impact.

“The leap in oil prices in the past month has set up a possible replay of the soft patch as consumers are squeezed,” he said in a report.

Earlier in the day, suspension of a general strike in major crude producer Nigeria had helped to cool prices a little, traders said.

“The Nigerian strike has been suspended but we are looking for prices to stay strong,” GNI-Man Financial trader Lee Elliott said in London.

World oil prices have more than doubled from about 20 dollars a barrel in New York at the start of 2002, surging by nearly 70 percent in New York since the start of this year.

Adjusted for inflation, however, they remain far below the levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today’s money.