August 13, 2004
LONDON - Fears of an oil shock deepened on Friday as crude set new highs, underpinned by fresh evidence of strong Chinese demand and worries about sabotage in Iraq.
News of an explosion at the Whiting, Indiana refinery also helped push U.S. front-month September light crude to a record $46.65 a barrel on the New York Mercantile Exchange, before closing at $46.58, up $1.08, or 2.4 percent, on the day.
London Brent also marched into record territory, touching $43.92 a barrel before settling up $1.59 at $43.88. Oil prices have set new records in all but one of the last 11 trading sessions.
Worries about possible unrest in oil producer Venezuela during this weekend’s referendum on the rule of President Hugo Chavez helped fuel Friday’s gains, analysts said.
“None of the fears about supply have gone away and demand growth shows no sign of slowing,” said independent oil analyst Geoff Pyne in London. “That makes it a difficult market to sell.”
“You’ve got Iraq along with the referendum in Venezuela on Sunday,” said Nauman Barakat of brokers Refco in New York. “It’s one problem after the other. I don’t see anything bearish in this market.”
Oil is up more than $10 a barrel since the start of the year. In real terms, adjusted for inflation, prices are still well below 1980’s peak of $80, following the Iranian revolution. But prices have surpassed those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
While leading economies so far have managed to cope with higher prices, signs are emerging that rising energy costs are starting to bite.
The chief economist of Germany’s central bank said oil was dampening the country’s economic outlook and persistently high prices could force a downgrade in the bank’s upbeat forecasts for growth and inflation.
Bundesbank chief economist Hermann Remsperger told Welt am Sonntag newspaper: “Further increases in oil prices would not only dampen global growth, but (German) purchasing power too.”
http://www.msnbc.msn.com/id/5612507/