LONDON, (Reuters):
OIL'S RECORD-breaking rally took U.S. crude over US$52 a barrel yesterday fuelled by the impact of Hurricane Ivan on U.S. winter inventories.
U.S. light crude set a record US$52.15 a barrel before closing trade at US$52.02, up 93 cents on the day.
London Brent, the benchmark for European imports, peaked at $48.10, closing up 87 cents at $48.00.
Oil has surged nearly 60 per cent, adding US$19 to U.S. crude, since the start of the year, driven by the strongest demand growth in a generation and a thinning cushion of spare capacity to cope with supply outages.
BULLISH MARKET
"It's frightening how bullishly the market is shaping up from a fundamental perspective," said Yasser Elguindi of Medley Global Advisors in New York.
"There's strong demand in Asia and Europe as well as the U.S. and inventories are low in all regions."
With little sign yet of any significant slowdown in the economic growth that is driving price gains, investment funds appear to see no reason yet to sell.
"Momentum can't be denied in this market and so we find ourselves now ... atop US$50 perhaps headed for US$60 absent some unforeseen catalyst for a wave of speculative selling," said Marshall Steeves of brokers Refco.
Despite high prices, U.S. oil demand is up three per cent in the year to date, to 19.96 million barrels a day, according to U.S. government data released yesterday.
HURRICANE IVAN
The latest focus of concern on supply is the United States. Damage from mid-September's Hurricane Ivan has kept closed 478,000 barrels per day from the U.S. Gulf of Mexico equivalent to about half the output of small OPEC producer Indonesia.
The U.S. government said that industry executives estimated it could take 45-90 days to restore crude production from offshore platforms.
The hurricane destroyed seven platforms and damaged several mobile rigs, the Energy Information Administration (EIA) said in its winter outlook report.
The storm also disrupted operations at Gulf Coast refineries, where plants were still working at only 89 per cent of capacity last week, cutting into heating fuel supplies.
Distillate stocks, including heating oil, fell by 2.1 million barrels to 123.4 million last week, down six per cent from year-ago levels, the EIA said in a weekly report.
"Ivan has completely eliminated the cushion of spare distillate stocks in the Atlantic basin," said Elguindi.
RISING DEMAND
"This is the heart of the problem across the globe there is rising oil product demand and little spare refining capacity to meet it."
Other major oil consumers also are holding thin heating oil supplies, with world number three energy user Japan running a significant deficit against last year, Japanese data showed on Wednesday.
The Organisation of the Petroleum Exporting Countries lifted production last month by 690,000 barrels a day to a 25-year-high of 30.15 million bpd, a Reuters survey found.
