Oil prices hit record highs near 100 dollars

A vehicle is filled with fuel at a petrol station in New Delhi
File - Manan Vatsyayana

LONDON - The price of crude oil surged to a record peak above 99 dollars per barrel in New York on Wednesday on the back of the falling US dollar and tight global crude supplies, traders said.

They failed to top 100 dollars, despite official data which showed that US energy stockpiles fell greater than expected last week.

In early trading on Wednesday, New York's main contract, light sweet crude for January delivery, rocketed to an historic 99.29 dollars. Following the release of data on US energy inventories, the contract stood at 98.19 per barrel, up 16 cents from Tuesday's close.

In London, Brent North Sea crude for January delivery jumped to an all-time pinnacle of 96.53 dollars per barrel and later stood at 95.76 dollars, up 27 cents.

"Oil soared to over 99 dollars a barrel on continued concerns over supply tightness," Sucden analyst Nimit Khamar said in London.

"However, oil has relinquished those gains... as some looked to take profits after the impressive rally."

The US Department of Energy (DoE) announced Wednesday that reserves of US crude oil had sunk by 1.1 million barrels in the week ending November 16. Analysts' consensus forecast had been for a gain of 750,000 barrels.

Oil prices "certainly may rally later on in the session," Altavest trader Tom Hartmann said after release of the data.

"The market obviously was wrong with expectations of gains in the inventories and it seems there is some hesitation as to which way to push the market."

The DoE added that US reserves of distillates, including crucial heating fuel and diesel, dived by 2.4 million barrels last week.

Graphic charting the price of crude oil
Graphic - Martin Megino

That was far heavier than market expectations for a drop of 450,000 barrels.

Traders are worried about US energy reserve levels because the United States is the world's biggest consumer of energy, ahead of number two China.

In the coming months, meanwhile, heating fuel demand was expected to rocket as the northern hemisphere winter stokes demand for distillates.

Crude oil prices have surged by about 64 percent since the start of 2007, also energised by supply disruptions in key producers such as Nigeria, geopolitical jitters over the Iranian nuclear crisis, and strong demand from China and India.

"The mythical 100 dollars per barrel is of course within reach for today, with or without the help of the weekly statistics," Petromatrix analyst Olivier Jakob said Wednesday.

Oil prices were also winning support from a troubled dollar, which Wednesday dived to a fresh record low point against the euro.

The European single currency surged to an historic high of 1.4855 dollars, as the US currency was hit by renewed worries about the outlook for the American economy, analysts said.

A weak dollar encourages demand for commodities like oil, which are priced in the greenback, because they become more attractive to investors using stronger currencies.

"The US dollar fell to fresh record lows against the euro on concerns of protracted weakness in the US housing market," said analysts at the Commonwealth Bank of Australia.

"The oil price benefited from the weakness in the US dollar," they added.