|Oil prices hit record high as U.S. crude goes above $59
|OPEC considers 500,000 barrels per day increase
World oil prices rose above $59 for the first time on Monday, fuelled by buying from speculators and funds amid concerns about possible energy shortages during the fourth quarter, traders said.
New York's main contract, light sweet crude for delivery in July, climbed $0.15 to $58.62 per barrel in early dealing after hitting $59.23 - the highest level since the contract was first traded in 1983.
In London, the price of Brent North Sea crude oil for delivery in August gained 19 cents to $57.95 per barrel after reaching a new record $58.58 - the highest level since trading of Brent began in 1988.
"I think you have to explain the strength by speculative and fund buying," Bache Financial trader Christopher Bellew said, adding:
"It looks like we have further on the upside before this market starts to fall again." In one month, prices have risen by 27 percent in New York and 22 percent in London. World crude prices have jumped by 40 percent since the start of 2005.
"The main reasons for the continued momentum remain the same as they have been throughout the strong push up over the past month: the perception of a tight balance for the back end of this year in a market with limited slack," said Barclays Capital analyst Kevin Norrish.
"That lack of flexibility has also greatly increased the sensitivity of the market to any potential interruption," he said, citing developments in Nigeria.
Crude oil futures had soared to fresh all-time records Friday as the market focused on global supply concerns amid a lack of refining capacity and security concerns in OPEC member Nigeria.
The New York contract had hit $58.60 on Friday, eclipsing the April 4 record of $58.28.
Prices began surging Friday after security worries forced the closure of the US embassy in Nigeria.
The United States and Britain reopened their consulates in Lagos on Monday three days after they were closed because of what the US State Department dubbed a "specific and credible" terror threat.
Nigeria, a major oil supplier to the United States, is the largest oil producer in Africa and the 11th biggest in the world.
Meanwhile, the market is also concerned about the fourth-quarter when demand for crude oil was expected to shoot up, notably because of the northern hemisphere winter.
A lack of refinery capacity could see insufficient crude being turned into heating fuel and other petroleum products such as petrol and diesel.
Elsewhere, the President of OPEC, Sheikh Ahmad al-Fahd al-Sabah, said Monday he would hold talks on hiking output by 500,000 barrels per day (bpd) if prices remained high over the next four days.
"If the prices continue to the end of this week at the same level, I will start consulting my colleagues to release the 500,000" bpd that "I was authorized to release," Sheikh Ahmad told reporters.
The OPEC chief said he would begin consultations with OPEC ministers for a possible increase after Friday.
Most in OPEC are already pumping at full capacity and Sheikh Ahmad said last week that any further increase could only be supplied by Saudi Arabia, the UAE and perhaps Kuwait itself.
Saudi Arabian Oil Minister Ali al-Naimi, who controls the bulk of spare OPEC capacity, has said the kingdom is able to lift output, but that at present there is no demand for extra crude from the world market.
Instead he, and others in OPEC, see refinery bottlenecks driving up prices by creating shortages of oil products - particularly diesel, jet fuel and heating oil.
Demand for crude, rather than price movement, should be the trigger for extra supply, Naimi has said.
OPEC's communiquÅ½ for its June 15 meeting gave no specifics on what oil price could trigger extra barrels.
Asked if Saudi Arabia has told him it is prepared to increase its output from the current 9.5 million bpd, the OPEC chief said:
"All the members of OPEC are ready. Whenever there will be a demand the market will be well supplied."
"We will continue to secure the supply to the market whenever there will be a demand," he added.
But he said his information showed there was no increase in demand and prices were high due to market psychology.
The Daily Star