Light Sweet Crude Oil New Record Price

Submitted by Marco Palmero on 7 June, 2008 - 18:44

We've seen a new milestone, light sweet crude for July delivery, New York's main oil futures contract has jumped on Friday (6/6/08) by $US10.75 a barrel which is the biggest one-day jump ever - to close at a record price at $US138.54 per barrel. The reason for the record-setting surge was a result of fears of a new Middle East conflict occurring from a comment made by a top Israeli official about Iran. While the closing price for the crude oil was at $US138.54, the high of the day was set at the all time high of $US139.12. Meanwhile, across the Atlantic, the Brent North Sea crude, traded in London also surged to new heights of $US138.12 per barrel (intraday) and closing at $US137.69 which made a $US10.15 jump in one day. Previous oil price records were set on Tuesday May 22: $US135.09 in New York and $US135.14 in London.

Other compelling reasons for the drivers to the record light sweet crude oil and Brent North Sea crude oil were the new decline of the US dollar (triggered by poor US unemployment numbers) and an interest rate hike by the European Central Bank. A comment made by Israeli Deputy Prime Minister Shaul Mofaz also triggered the jump: the remarks were reported by the Yediot Aharonot newspaper which said: "If Iran continues its nuclear weapons program, we will attack it," Mofaz told the paper, stressing that such an operation could only be conducted with US support."Other options are disappearing. The sanctions are not effective. There will be no alternative but to attack Iran in order to stop the Iranian nuclear program," Mofaz, who is also transportation minister, said.

Morgan Stanley, an investment bank has predicted that light sweet crude oil will hit a band new record price very soon: at July 4 on US Independence Day because of tight oil supply. Crude oil is the world's most actively traded commodity and light, sweet crudes are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel. What is quite interesting is that back in 2006 I actually posted a blog about trading oil where economists were predicting oil at above $70. Also in 2006 I also speculated that the petrol price will reach $1.50 per litre. Two years later, the petrol price IS $1.50 per litre of unleaded fuel in Sydney. So I think the position is still the same as I wrote in 2007: Long on Oil. Demand is ever rising while supply is being tightly controlled. There is only one direction price can go: up.

More about

Recession required to cut

Recession required to cut oil prices: economist

Wow... we need a worldwide recession for oil prices to reset back below $100... of course there will be major consequences...

A leading economist says it would take a worldwide global recession to reduce the price of oil to below $US100 a barrel.

Oil hit a record price of $US139 a barrel on Friday after its biggest one-day jump of $11.

The spike was triggered by comments from Israel's Transport Minister, who said Israel would attack oil-producing Iran if it continued its nuclear program.

Centre for Global Energy Studies chief economist Leo Drollas says a major slowing in global economic conditions is needed to force oil prices down.

"Unfortunately the cure is worse than the disease in this case," he said.

"But if we went into a worldwide slowdown, an economic slowdown, or even a recession, then that would really put pressure on demand and reduce prices."

Dr Drollas says the five main energy-consuming nations - United States, China, Japan, India and South Korea - need to keep pressuring OPEC to increase oil production so the price of oil comes down.

"There are not many countries that can increase output," he said.

"There are only about three - mainly Saudi Arabia which holds 80 per cent of the spare capacity of the world - around 2 million barrels a day, and then a smaller amount from Kuwait and the United Arab Emirates

Oil prices have crossed

Oil prices have crossed $US140 a barrel for the first time in New York and London amid a declining dollar and after OPEC warned prices could hit $US170 this year. New York's main oil futures contract, light sweet crude for August delivery, shot up $US5.50 dollars to trade as high as $US140.05 dollars per barrel.

In London, Brent North Sea crude for August jumped $US6.05 dollars to $US140.38 dollars. The price of crude oil shot up on the new dollar weakness, which makes the dollar-denominated commodity cheaper for buyers using stronger currencies.