Oil Surges Again
Posted by Big Gav in oil price
Oil prices made a dramatic surge overnight, with the price breaching the US$139 a barrel mark - reasons given were fears of Israeli conflict with Iran and a Morgan Stanley report predicting US$150 a barrel by July - along with falls in the USD.
Oil prices shot up more than $US11 to a new record above $US139 on Friday after Morgan Stanley predicted prices would hit $US150 by the Fourth of July.
Oil's meteoric surge, which pushed prices more than 8 per cent higher in a single day, added to a huge increase Thursday to cap oil's biggest two-day gain in the history of the New York Mercantile Exchange. The burst higher - which also came on rising Middle East tensions - also raised the prospect of accelerating inflation by adding to already strained transportation costs.
That gloomy outlook sent stocks tumbling, taking the Dow Jones industrials down more than 300 points.
Light, sweet crude for July delivery jumped as high as $US139.12 on the Nymex, before easing slightly to settle at $US138.54, up $US10.75. Prices hit a previous record of $US135.09 a barrel on May 22, and settled Thursday at $US127.79.
In London, July Brent crude shot up $US7.75 to $US135.30 a barrel on the ICE Futures exchange.
Prices pushed sharply higher Friday after Morgan Stanley analyst Ole Slorer predicted strong demand in Asia could drive prices to $US150 by Independence Day (July 4), when millions of Americans are expected to take to the roads. Slorer said shipments from the Middle East are mimicking patterns seen in the third quarter last year, when Morgan Stanley based an oil price spike prediction on falling supplies in the Atlantic.
"We made the same call using the same parameters, but now we are starting from much lower inventory levels," Slorer said.
Traders also zeroed in on remarks by an Israeli cabinet minister, who was quoted as saying his country will attack Iran if it doesn't abandon its nuclear program. Transportation Minister Shaul Mofaz added that Iranian President Mahmoud Ahmadinejad "will disappear before Israel does," the Yediot Ahronot daily reported.
Iran is the second-biggest producer in the Organisation of Petroleum Exporting Countries, and traders worry that any conflict with Israel could disrupt global supplies
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