- The Washington Times - Monday, June 27, 2005

ASSOCIATED PRESS

Oil prices settled at a record high above $60 per barrel yesterday, reflecting traders’ concerns about strong demand and potential supply bottlenecks.

With $60 no longer a threshold — and with continued concerns about refining capacities — prices appeared poised to go even higher, analysts said.

Oil broker Tom Bentz at BNP Paribas Commodity Futures in New York said the rally was just a continuation of the larger uptrend that began in late May.

Mr. Bentz said there is also a speculative component to the surge in oil prices, though he also said the world’s limited excess production and refining capacity have played important roles in keeping traders on edge about potential supply disruptions.

After climbing as high as $60.95 per barrel, an intraday record, the August contract for crude rose 70 cents to close at $60.54 per barrel on the New York Mercantile Exchange. It was the highest settlement on record at Nymex, where crude futures began trading in 1983. The previous settlement high was $59.84 per barrel, set Friday.

Adjusted for inflation, prices peaked in 1980 above $90 a barrel.

Other petroleum products followed crude’s rise.

Heating-oil futures surged 2.57 cents to $1.68 a gallon. Gasoline futures rose 1.93 cents to $1.68 a gallon.

“The psychology of the market is that once $60 is breached, then there is tendency to test how much higher it can go, or how long $60 can be sustained,” said Victor Shum, petroleum analyst at Texas energy consultants Purvin & Gertz in Singapore.

“There’s a lot of speculative activity. It is a red-hot market,” Mr. Shum said.

With demand expected to average 84 million barrels per day in 2005, analysts say there is not enough of a supply cushion to shield the market from any prolonged output disruption. Excess production capacity is estimated to be 1.5 million barrels per day, most of it in Saudi Arabia.

Another reason for trepidation among traders is the limited refining capacity in the United States, which is increasingly reliant on imports of gasoline. Any glitch in the U.S. refining system puts more strain on the global supply chain.

Still, record-setting prices have yet to cool demand for gasoline in the United States, where consumption is up — at a time when prices are 40 percent higher than a year ago.

“These high prices really have not significantly dented demand, particularly in the United States market,” Mr. Shum said. “U.S. refineries in the past week have been running very full at 96, 97 percent.”

Gasoline prices at the pump rose 5.4 cents in the week ended yesterday, with regular, self-serve reaching $2.215 per gallon, according to the Energy Information Administration.


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