Oil closes over $50
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The price of oil settled above $50 a barrel for the first time yesterday amid concerns about tight supplies globally and hurricane-related production problems in the Gulf of Mexico. On the New York Mercantile Exchange, crude for November delivery settled at a record $50.12 per barrel, up 48 cents. Adjusting for inflation, oil prices are roughly $30 below the peak set in 1981. Meeting in Washington, the world’s industrialized countries declared that high oil prices are a threat to the global economy and urged producers to provide price relief by boosting supplies. But the thin global supply cushion and the slow return of oil and natural gas production in the Gulf of Mexico, where Hurricane Ivan roared through two weeks ago, have kept energy markets on edge for weeks. Ed Silliere, vice president of risk management at Energy Merchant in New York, said fears that terrorists might cause trouble in oil-producing nations such as Iraq and Saudi Arabia have added to market jitters. The low volume of trading may also have contributed to yesterday’s rally, analysts said. The federal Minerals Management Service said yesterday that daily oil output in the Gulf of Mexico is 28.5 percent below normal at roughly 1.2 million barrels — the same level it was at a week ago. “For the commercial economy, that hurts,” said Tom Kloza, director of Oil Price Information Service of Lakewood, N.J. The average retail price of gasoline is $1.92 per gallon nationwide, up 33 cents from a year ago, after rising two weeks in a row. With demand strong and the nation’s supply of crude 4 percent below last year’s level at 272.9 million barrels, according to Energy Department data, some analysts say oil prices are headed for $55 per barrel or higher. Others keep waiting for the months-long rally to end. “These prices are awfully frothy right now,” said Kloza, noting that oil prices typically reach a peak in early October and then begin to slide significantly. The Group of Seven countries — the United States, Japan, Germany, France, Britain, Italy and Canada — said: “Oil prices remain high and are a risk.” To deal with the situation, the G-7 financial officials urged oil-producing countries to “provide adequate supplies to ensure that prices moderate.” The G-7 said it also was important for oil-consuming nations to increase energy efficiency, and the International Energy Administration should accelerate efforts to provide better quality of data on oil resources and production. The group also resolved to agree on providing battered Iraq with relief from its massive debt burden while also working on a deal to increase debt relief for the world’s poorest countries. On Iraq, the G-7 officials restated their goal of reaching a framework for an agreement by the end of the year that would reduce the country’s $120-billion foreign debt. The dispute over resolving Iraq’s debt also spilled over into G-7’s efforts to provide relief to the world’s poorest countries. France has insisted that Iraq not get a better debt deal than is being offered to the poor nations, thus thwarting so far the U.S. drive to speed debt relief to Iraq. The G-7 discussions preceded the weekend meetings of the 184-nation International Monetary Fund and the World Bank. |