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Oil Prices Settle Near $131 after Intraday Record

Reuters
Thursday, 22 May 2008 | 3:41 PM ET

Oil prices pulled back sharply from a record above $135 a barrel on Thursday as dealers took profits from a dazzling rally and a recovering U.S. dollar dampened commodities markets.

U.S. crude settled down $2.36 at $130.81 a barrel on the New York Mercantile Exchange after jumping earlier in the session to a record $135.09. London Brent crude fell $2.30, to $130.40, after touching a peak of $135.14.

Oil Refinery
Oil Refinery

"Some people had set a target of $135 as part of their investment strategy and once that price was achieved have started taking some profits," said Phil Flynn, analyst at Alaron Trading in Chicago.

Dealers also noted selling across other commodities markets as the dollar recovered on a drop in U.S. jobless claims.

The pullback came after crude rallied more than a third since the start of the year, driven by worries about tight stocks of refined products in the near term and mounting global demand over the longer term.

"The combination of increasing demand and constricted supply will continue to keep oil prices strong," Robin Batchelor, manager of BlackRock's BGF World Energy fund, said in a research note.

Oil has risen sixfold since 2002, propelled by rising consumption in China and other developing countries.

Concerns about long-term supply tightness have also recently pushed prices for future delivery even higher than prompt contracts. December 2016 U.S. crude reached $145.60 a barrel, making it the loftiest contract on the futures curve.

Oil prices surged on Wednesday after U.S. weekly data showed crude stocks declined by 5.4 million barrels. Analysts had expected an increase.

OPEC Secretary-General Abdullah al-Badri said Thursday the group can do nothing to lower oil prices, and called the oil market "crazy."

The United States has repeatedly called on the Organization of the Petroleum Exporting Countries (OPEC) to boost its output to try to calm markets, but the group has said no increase is needed.

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