Oil Surpasses $76 as Violence Persists
By Brad Foss
The Associated Press
THE PRICE IS REALLY AT 78$ A BARREL AND CLIMBING
Thursday 13 July 2006
Oil prices hit a new high above $76 a barrel Thursday in a market agitated by escalating violence in the Middle East.
The latest surge in oil shook stock-market investors' confidence, though economists said most U.S. consumers and businesses appear to be absorbing higher energy costs surprisingly well.
U.S. gasoline demand continues to rise in spite of near $3-a-gallon pump prices, core inflation remains relatively low and the U.S. economy is forecast to grow by roughly 3 percent in the second half of the year.
"Two years ago I might have said that $70 or $75 a barrel would be some kind of a tipping point. Now I'm not so sure anymore," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.
Still, Behravesh said lower-income Americans are suffering disproportionately from higher energy costs and "I could certainly make a policy case for helping them out on a temporary basis."
Light sweet crude for August delivery shot up as high as $76.55 a barrel on the New York Mercantile Exchange as fighting between Israel and Lebanon intensified, explosions hit Nigerian oil installations and a diplomatic standoff dragged on between the West and Iran over its nuclear program. The previous Nymex high of $75.78 was set last Friday.
Adjusted for inflation, oil prices would need to rise to about $90 a barrel to exceed the highs set a quarter century ago when supplies tightened in the aftermath of a revolution in Iran and a war between Iraq and Iran.
Today oil prices are being pushed higher by rising global demand and worries that the world's limited supply cushion would not be adequate to offset a lengthy disruption to output in major producing countries, such as Iran or Nigeria. There are also concerns about the risks hurricanes pose to U.S. production.
The latest fear being priced into the market is that the conflict between Israel and Lebanon could spill over into other corners of the Middle East, the region that produces nearly a third the world's oil and contains almost two-thirds of its untapped reserves.
Israel intensified its attacks against Lebanon on Thursday, blasting Beirut's airport and two Lebanese army air bases near the Syrian border, and imposing a naval blockade. More than 50 people have died in violence following the capture of two Israeli soldiers by Hezbollah militants.
In Nigeria, government officials said twin explosions hit oil installations belonging to an Italian oil company in the volatile southeastern delta region. Elsewhere, militants attacked a group of 11 boats carrying supplies to Chevron's offshore oil fields Wednesday, killing four navy sailors who were escorting the convoy, Brig. Gen. Alfred Ilogho said Thursday.
"The oil price has become a register of geopolitical tensions and fears," said Daniel Yergin, who heads Cambridge Energy Research Associates.
Yergin said petroleum supply-demand fundamentals are improving, with global oil inventories and spare oil-production capacity rising, but clearly not enough to offset the geopolitical unrest.
The surge in oil prices rattled stock market investors, sending the Dow Jones industrials sharply lower for the second straight day. Shares of Wal-Mart Stores Inc., the world's largest retailer, slumped 2 percent on the New York Stock Exchange on concerns that high energy prices are cutting into consumers' discretionary income.
"The economy took $50 oil in stride," Yergin said. "It's clearly not taking $70 or $75 a barrel in stride. This is a rougher adjustment."
In other Nymex trading, gasoline futures climbed 3 cents to $2.29 a gallon, heating oil futures rose more than 3 cents to $2.05 a gallon and natural gas futures advanced 20 cents to $5.99 per 1,000 cubic feet.
The Associated Press
THE PRICE IS REALLY AT 78$ A BARREL AND CLIMBING
Thursday 13 July 2006
Oil prices hit a new high above $76 a barrel Thursday in a market agitated by escalating violence in the Middle East.
The latest surge in oil shook stock-market investors' confidence, though economists said most U.S. consumers and businesses appear to be absorbing higher energy costs surprisingly well.
U.S. gasoline demand continues to rise in spite of near $3-a-gallon pump prices, core inflation remains relatively low and the U.S. economy is forecast to grow by roughly 3 percent in the second half of the year.
"Two years ago I might have said that $70 or $75 a barrel would be some kind of a tipping point. Now I'm not so sure anymore," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.
Still, Behravesh said lower-income Americans are suffering disproportionately from higher energy costs and "I could certainly make a policy case for helping them out on a temporary basis."
Light sweet crude for August delivery shot up as high as $76.55 a barrel on the New York Mercantile Exchange as fighting between Israel and Lebanon intensified, explosions hit Nigerian oil installations and a diplomatic standoff dragged on between the West and Iran over its nuclear program. The previous Nymex high of $75.78 was set last Friday.
Adjusted for inflation, oil prices would need to rise to about $90 a barrel to exceed the highs set a quarter century ago when supplies tightened in the aftermath of a revolution in Iran and a war between Iraq and Iran.
Today oil prices are being pushed higher by rising global demand and worries that the world's limited supply cushion would not be adequate to offset a lengthy disruption to output in major producing countries, such as Iran or Nigeria. There are also concerns about the risks hurricanes pose to U.S. production.
The latest fear being priced into the market is that the conflict between Israel and Lebanon could spill over into other corners of the Middle East, the region that produces nearly a third the world's oil and contains almost two-thirds of its untapped reserves.
Israel intensified its attacks against Lebanon on Thursday, blasting Beirut's airport and two Lebanese army air bases near the Syrian border, and imposing a naval blockade. More than 50 people have died in violence following the capture of two Israeli soldiers by Hezbollah militants.
In Nigeria, government officials said twin explosions hit oil installations belonging to an Italian oil company in the volatile southeastern delta region. Elsewhere, militants attacked a group of 11 boats carrying supplies to Chevron's offshore oil fields Wednesday, killing four navy sailors who were escorting the convoy, Brig. Gen. Alfred Ilogho said Thursday.
"The oil price has become a register of geopolitical tensions and fears," said Daniel Yergin, who heads Cambridge Energy Research Associates.
Yergin said petroleum supply-demand fundamentals are improving, with global oil inventories and spare oil-production capacity rising, but clearly not enough to offset the geopolitical unrest.
The surge in oil prices rattled stock market investors, sending the Dow Jones industrials sharply lower for the second straight day. Shares of Wal-Mart Stores Inc., the world's largest retailer, slumped 2 percent on the New York Stock Exchange on concerns that high energy prices are cutting into consumers' discretionary income.
"The economy took $50 oil in stride," Yergin said. "It's clearly not taking $70 or $75 a barrel in stride. This is a rougher adjustment."
In other Nymex trading, gasoline futures climbed 3 cents to $2.29 a gallon, heating oil futures rose more than 3 cents to $2.05 a gallon and natural gas futures advanced 20 cents to $5.99 per 1,000 cubic feet.
posted by Freedom Fighter | 11:21 AM
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