Oil Prices Hit Post-Gulf War High Again

North Sea Brent crude futures on Londons International Petroleum Exchange rose by eight cents to close on the day at $24.57 after briefly touching the high of $24.70 a barrel.

On Monday the November Brent crude oil contract soared 69 cents to the previous record of $24.50, settling just one cent lower at the close.

Tuesdays peak was the highest price for near-month crude since a high of $31.20 was reached in January 1991, when US-led forces began their offensive against Iraqi occupying troops in Kuwait.

Theres not as much crude around as people expected, said Geoff Pyne, oil analyst at investment bank UBS, explaining the current strong market. In the short term there doesnt seem to be anything to get the market back down. Maybe in 1997 there will be a change, but not now, he added. The outlook is firm for this quarter, but supplies are building and its only a matter of how long it will last.

 

Pyne and other analysts and traders said concern about low US heating oil stocks was continuing to drive the market after they were caught short by last years bitterly cold winter in the northeastern United States. Heating oil prices have gone up even faster than crude. Its the major impetus for the market, said Pyne.

The worries were exacerbated by the first chill of winter in the northeastern US last weekend, with heating oil stocks about one third down from last year.

Also seen as bullish was an International Energy Agency (IEA) report on Tuesday which forecast global oil demand in the fourth quarter at a record 73.7 million barrels per day (bpd), a 100,000 bpd upward revision from last months estimate.

Some analysts say the IEA projections may be conservative. A robust US economy and fierce demand in countries such as India, South Korea and Brazil could boost global oil consumption even more.

We think the IEA will have to make further upward revisions to demand as the year goes on, said Mehdi Varzi, oil analyst at Kleinwort Benson in London.

Year on year, the worlds thirst for oil is expected to rise by a sharp 1.7 million bpd in 1996 and 1.8 million next year, the IEA said.