Oil Ends Above $96 on Dollar, Winter Supply Doubts

Oil ended above $96 Friday on winter fuel supply concerns, a tumbling U.S. dollar and big options positions betting oil could strike $100 next week.

Oil Barrels
Oil Barrels

U.S. light, sweet crude ended Nymex trade up 86 cents at $96.32 per barrel, off earlier highs of $96.68.

London Brent crude climbed 39 cents to $93.18.

Oil struck a record $98.62 per barrel Wednesday as falling inventories in consumer nations stirs worries of a supply shortage during the Northern Hemisphere winter.

Support has also come from a large volume of options positions for $100 oil on the New York Mercantile Exchange, still open despite the expiration Tuesday.

Experts said that with 42,000 options contracts to buy oil at $100 still open, financial players may try to push oil into triple digits ahead of the expiration.

"I think the one thing that people are continuing to eye is the options expiration," said Eric Wittenauer, analyst at AG Edwards in St. Louis. "I think people would be hesitant to sell into this market."

Oil prices could tumble though once the options expire, Lehman Brothers said in a research note.

While concerns about the economic health of top oil consumer the United States helped drag down prices from Wednesday's record, low inventories of crude in consumer nations continue to support.

European distillate stocks fell for the fifth month in a row in October, while the giant U.S. market remains tight.

"U.S. crude oil inventories have continued to fall counter-seasonally," Barclays Capital said.

"The seasonal swing in demand will put further pressure on stocks," it said. "Even if OPEC raises production further in December, the effect of the increase will not be felt in consuming regions until well into the first quarter of 2008."

At least nine oil and gas platforms in the Norwegian part of the North Sea had shut due to a storm overnight Thursday, but operators were restarting fields Friday.

The weak dollar, which has helped boost the oil price, hit record lows against the euro on Friday as Bernanke's comments increased expectations of another cut in U.S. interest rates.

The dollar's slide has helped maintain the allure of crude for financial investors and speculators who have helped lift oil by 40 percent since mid-August.

"Investments in commodities continue to grow," said a Bank of America research note. "With the latest estimates putting the total capital tracking commodity indexes at $150 billion."