MercoPress. South Atlantic News Agency

Oil touches 100 US dollars a barrel on supply concern

Oil prices break through $100 a barrel barrier

Crude oil rose to $100 a barrel for the first time in New York as record global fuel consumption threatens to outpace production.

Oil's gain, extending last year's 57 percent rally, was boosted by forecasts that U.S. stockpiles dropped to a three-year low last week. Unrest in Nigeria, Africa's largest oil producer, also spurred prices. ''This is the culmination of everything that we talked about last year,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ''Various geopolitical problems have deteriorated overnight, in particular Nigeria and Pakistan. Commodities, and in particular oil, have become safe havens in a dangerous world.'' Three-figure prices may bring energy costs near the tipping point that will cause global economic growth to falter. China has more than doubled oil use since New York crude dropped to this century's low of $16.70 a barrel on Nov. 19, 2001. That's soaked up most of the world's spare production capacity amid supply cuts in Nigeria, Iraq and Venezuela. Crude oil for February delivery rose $4.02, or 4.2 percent, to $100 a barrel at 12:10 p.m. on the New York Mercantile Exchange, the highest since trading began in 1983. Prices were up $3.30, or 3.4 percent, to $99.28 a barrel at 12:47 p.m. Important Number''This is an important psychological number,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ''Everyone has been expecting this since early December.'' Prices on Oct. 15 passed the previous all-time inflation- adjusted record. Measured in today's dollars, prices in 1981 rose as high as $84.73 after a decade of Middle East instability including the Arab-Israeli war in 1973, the Iranian revolution in 1979 and the Iran-Iraq war that began in 1980. Oil embargoes and higher prices helped trigger recessions in developed countries, prompting efficiency drives that sent prices lower for two decades to as little as $10.35 a barrel on Dec. 21, 1998. Soaring energy costs have so far failed to choke rising consumption in developing nations, led by China and India. Asia's developing economies will grow 9.8 percent this year, the International Monetary Fund said in its Oct. 17 World Economic Outlook report. Brent Oil Brent crude for February settlement rose $3.65, or 3.9 percent, to $97.50 a barrel on London's ICE Futures Europe exchange. Futures touched $97.74, the highest since trading began in 1988. The dollar's 11 percent slide last year against the euro boosted the oil price because it made commodities cheaper for buyers outside the U.S. and attracted investors as a hedge against inflation. A simmering dispute between the U.S. and Iran, the Organization of Petroleum Exporting Countries' second-largest producer, has contributed to oil's rally. President Mahmoud Ahmadinejad has said Iran wants to develop atomic energy to generate electricity. George W. Bush's administration says the project is a cover for producing nuclear weapons. A military conflict would threaten almost a quarter of global oil supply that passes from the Persian Gulf through the Strait of Hormuz waterway off Iran's coast. Nigeria, VenezuelaIn Nigeria, Africa's biggest oil exporter, militants have attacked oil installations and kidnapped foreign workers since the beginning of 2006, forcing Royal Dutch Shell Plc to halt about 500,000 barrels a day of output, almost a quarter of the country's total. In Venezuela, production has slumped to about 2.42 million barrels a day from almost 3 million barrels a day in 2002, according to Bloomberg's estimates, before President Hugo Chavez fired almost 20,000 workers who had closed the state oil company in an attempt to overthrow the government. Iraq's oil production has yet to reach levels attained before the U.S.-led invasion of 2003 as the country struggles with sectarian fighting and attacks on its energy infrastructure. Higher prices have been cast as vindication for a theory that the world has reached the maximum rate of oil production as explorers fail to discover major new fields to replace aging deposits being tapped in countries such as Saudi Arabia, Kuwait and Iran. While Saudi Arabian Oil Minister Ali al-Naimi and Exxon Mobil Corp. President Rex Tillerson have said oil supplies will last for decades, energy traders are increasingly debating the amount of available crude. Investors who back the peak-oil theory, such as Boone Pickens, a Dallas hedge fund manager and former oil executive, have led the price rally of the past two years. Pickens, chairman of BP Capital LLC, correctly predicted in 2004 that oil prices would top $60 a barrel in 2005 and in early 2006 said oil could reach $90 to $100 a barrel within two years. (Bloomberg)