Oil Ends Above $87 on Supply Fears
Oil closed higher Wednesday, after a sharp fall in U.S. inventories stirred up fears of a supply shortfall ahead of winter.
U.S. light, sweet crude rose $1.83 to close trade at $87.10 per barrel, erasing three days of losses that dragged prices down from a record $90.07 struck Friday.
London Brent crude rose $1.15 to $84.00.
U.S. crude oil stocks fell 5.3 million barrels last week, according to data from the U.S. Energy Information Administration, well above analyst forecasts for an 800,000 barrel build.
"This report could set the stage for a test of the contract highs," said Jim Ritterbusch, president of Ritterbusch & Associates. "This is going to entice a lot of fund money back into the long side of this market."
The data also showed a 1.8 million barrel fall in distillate stocks and a 2 million barrel draw in gasoline stocks.
Oil has jumped about 40 percent this year and surged to new records over the past month on worries over consumer nation inventories as the Northern Hemisphere gears up for winter.
A fresh wave of cash has also supported prices from investors eyeing tighter fundamentals, the weak dollar, and tensions in the Middle East.
"The debate remains very much alive as to whether the oil market remains seriously under-supplied going into winter," investment bank Citi said in a research note.
"A move north of $95 or a move south of $80 both appear possible right now."
Further supply concerns came from news Mexico -- one of the top exporters to the U.S. market -- closed its main oil exporting ports due to bad weather on Tuesday.
Rising prices have spurred concerns from the administration of President Bush, and China -- the second biggest consumer -- complained to OPEC officials about high prices during a meeting in Beijing.
U.S. Energy Secretary Sam Bodman called on the cartel to raise output again, after OPEC agreed last month to hike production by 500,000 barrels per day (bpd) from Nov. 1.
Tanker tracker Petrologistics said OPEC has already reached the new production target, while one OPEC official said another output increase may be needed.
"My personal view is I think we need to increase another 500,000 barrels per day in November," said one of the more senior delegates in OPEC.
Tensions between Iraq and Turkey over Kurdish rebels operating from the north of Iraq are still simmering.
Turkish warplanes and troops have attacked Kurdish rebels inside Iraq and forces have been built up on the border, but Ankara has held back from any major strike for now.