Crude oil prices reach new high
Crude oil rose to a record close of $78.23 a barrel Tuesday in New York on speculation that an agreement by the Organization of the Petroleum Exporting Countries to increase production by 500,000 barrels a day would be insufficient to meet strengthening demand.
“We are going to need more than 500,000 barrels to meet rising demand,” said Tom Bentz, a broker at BNP Paribas in New York. “We are also up on speculation that the interest rates will be cut, which would help the economy and lead to higher demand for oil.”
Saudi Arabia led the group to adopt the increase from OPEC’s current production starting in November. Global oil consumption will rise 1.5% this year as production stagnates, the Energy Department reported Tuesday. The OPEC target will be 27.2 million barrels a day beginning Nov. 1, Kuwaiti Oil Minister Mohammed Abdullah Aleem said in an interview.
Crude oil for October delivery rose 74 cents, or 1%, to $78.23 a barrel on the New York Mercantile Exchange. It’s the highest since trading began in 1983. The previous record close of $78.21 was reached July 31. Prices are up 19% from a year earlier.
Prodded by the U.S., Saudi Arabia overcame opposition by fellow OPEC members Venezuela, Algeria and Iran, which said the world was adequately supplied with oil.
High oil prices are a drag on the economy in the U.S., the biggest consumer of oil. Prices fell 5.3% last month on speculation that sub-prime-mortgage losses in the U.S. would spread through the economy, reducing growth and fuel demand.
“The Saudis are concerned about the U.S. slowdown,” said Adam Sieminski, Deutsche Bank’s chief energy economist in New York.
“The possibility of an economic downturn is their focus at the moment, but when you look ahead there will a different problem. Robust demand and lagging non-OPEC supply suggest strong support for oil prices beyond 2010.”
Global petroleum consumption will probably increase by 1.27 million barrels to 85.7 million barrels a day this year, the Energy Department said.
