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LONDON (Thomson Financial) - Oil dipped to trade around $123 a barrel
Thursday following yesterday's fresh record high, with the U.S dollar's firmer
tone calming bullish sentiment.
Prices surged on Wednesday due to concerns over falling distillate
inventories in the United States, continuing the recent run which has seen new
all-time highs posted in each of the last three sessions in New York.
While analysts have pointed to long-term fears that rising demand for crude
could outstrip supplies to explain crude's most recent rally, as well as
short-term concerns over Nigerian supply outages and tight global markets for
diesel and heating oil, the U.S. dollar's bounce has capped gains as commodities
priced in the greenback become relatively more expensive for holders of other
currencies.
"Clearly the current spike in oil prices has been sharp and furious and with
little in the way of fresh impetus and lack of supporting fundamentals a
retracement must surely be on the cards," said Bank of Ireland analyst Paul
Harris. "That said, in current conditions it is difficult to call exactly when
the bearish elements will prevail. More importantly, the key issue is how far
that pullback will be, with oil prices below $100 a barrel at this stage a dim
and distant memory," he added.
At 10:36 a.m., New York-traded West Texas Intermediate crude for June
delivery was down 28 cents to $123.29 a barrel, having yesterday hit a record
high of $123.93 a barrel.
In London, Brent crude for June delivery was down 14 cents at $122.18,
having yesterday touched an all-time record of $122.37.
Wednesday's weekly report of U.S. fuel stocks figures provided the spur for
yesterday's price jump, with distillate stocks declining by 100,000 barrels
against market expectations for a 1.3 million barrel gain.
However, crude and gasoline inventories rose by more than expected, with a
massive 5.7 million barrel rise in crude stockpiles trumping market estimates
for just a 2 million barrel build, weighing on prices.
Gasoline inventories rose by 800,000 barrels, against market expectations
for a fall of 200,000 barrels.
Goldman Sachs' prediction this week for oil prices to reach between $150 and
$200 over the next two years has fanned the flames under crude's move into
unchartered territory. The call came from analyst Arjun Murti, who three years
ago correctly predicted oil's rise above the $100 mark when prices were almost
half that price.
Booming demand from developing nations like China and India has raised fears
global oil production may be unable to keep up, leading to a potential
short-fall of supplies.
Robin Batchelor, fund manager of BlackRock's World Energy Fund said
yesterday that oil prices are likely to remain high well into the next decade.
"If China and India were to increase their consumption per person to current
U.S. levels, these two countries alone would require 160 million barrels per
day, more than twice the world's supply of oil today," Batchelor said, adding
that high oil prices were also contributing to "resource nationalism" as oil
producing countries demand a bigger share of the industry's profits, curbing
access and investment from the major oil companies.
d.sheppard@thomsonreuters.com
ds1/slm/ds1/ra
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