Oil Hits New High Over $82 On Supply Fears

Oil Refinery
Oil Refinery

Oil struck a new record over $82 Wednesday as falling U.S. inventories and the threat of a storm gathering near Florida renewed supply concerns in the world's biggest energy consumer.

U.S. light, sweet crude settled up 42 cents at $81.93 per barrel, after hitting a record $82.51.

London Brent crude gained 88 cents to $78.47 per barrel.

Prices have touched record highs for six consecutive trading days, supported by fears of a possible supply crunch during the Northern Hemisphere winter.

Government data showing a 3.8 million-barrel draw in U.S. crude oil stocks last week added to worries. It was nearly twice analysts' forecasts and the fourth straight fall.

The market already was rallying after the U.S. Federal Reserve's interest rate cut raised expectations energy demand would remain robust.

"The crude draw being more than forecast would prove to be supportive, in a complex that for weeks has eyed the inventory drawdown and the expected tightness in inventories going forward," said Eric Wittenauer of A. G. Edwards in St. Louis.

Oil's gains were supported by news several oil companies were evacuating nonessential workers from oil rigs in the Gulf of Mexico due to the threat of a storm.

The National Hurricane Center said a tropical disturbance near Florida was set to strengthen and lurch in the Gulf, home to a quarter of U.S. oil output, though computer forecast models showed shrinking chances of any impact.

"Our meteorologists tell us the longer this stays iffy, the greater the chance that it doesn't strengthen into a storm," said Kyle Cooper, analyst at IAF Advisors in Houston.

New Highs

Oil -- up a third since the start of the year -- has risen on hurricane threats and other supply risks, a flow of investor money into energy from poorly performing equity markets and falling U.S. fuel inventories.

"Now the market is going to be searching for $85 a barrel," said Tony Nunan of Mitsubishi in Tokyo, before the U.S. inventory report was released.

The Organization of the Petroleum Exporting Countries last week decided to raise oil output by 500,000 barrels per day from Nov. 1, but the move did little to soothe consumer concerns that supplies may run thin this winter.

A source from OPEC said oil ministers probably would hold talks about a further output boost if prices stayed above $80 per barrel for several weeks.

Some of OPEC's 12 members are worried that record prices will harm global economic growth and erode oil demand.

Though U.S. crude has quadrupled since 2002, adjusted for inflation the price is below the $90 peak in 1980, when the Iran-Iraq war started.