Nymex Crude Surges Above $133 Fourth Record in a Row
OTTAWA (Dow Jones Newswires), May 21, 2008
Crude oil futures leaped past $133 a barrel Wednesday, as ongoing market momentum pushed prices deeper into record territory after an unexpected slump in U.S. oil inventories.
The new front-month July contract for light, sweet crude settled up $4.19, or 3.3%, at a record $133.17 a barrel on the New York Mercantile Exchange, but hit a new high of $133.82 a barrel just after the close. The gain is crude's fastest ascent in dollar terms since March 26 and marks the fourth straight session in which oil has hit a new record.
Brent crude on the ICE futures exchange closed $4.85 higher at $132.69 a barrel, also a record, after racing to a high of $132.93 a barrel earlier. Settlement prices weren't in yet.
The move extends a red-hot rally that's brought the price of oil and a host of products derived from it to levels many analysts have found flabbergasting. The rally is taking its cue primarily from strong global oil demand, most notably from China and concerns about supply disruptions.
Nymex crude futures are up 39% since the start of the year, when prices first breached $100 a barrel, while futures are up 17% since the beginning of May. Futures contracts for oil products also settled at all-time highs.
The weekly U.S. inventory data kickstarted the run earlier in the trading session. The Energy Information Administration reported U.S. crude stockpiles fell by 5.3 million last week as refineries ratcheted up utilization rates amid a sharp drop in imports, defying analysts' expectations of a 500,000 barrel increase.
Distillates stockpiles rose 728,000 barrels, less than the forecast 1.2 million-barrel gain, while gasoline inventories fell 755,000 barrels versus the expected 400,000-barrel gain.
While the report certainly invigorated crude prices, sheer momentum in the market amplified the rally, analysts said.
"The feeling here is that the bears just can't catch a break and the bulls are in the driver's seat," said Peter Beutel, president of trading advisory firm Cameron Hanover. "It just seems to be a game of leapfrog."
Prices have also jumped at the outer end of the futures curve, trading at a premium to front-month contracts in a direct reversal of recent patterns. Nymex crude for August delivery settled higher than for July and September higher still, but the longest-dated contract for December 2016 settled at $142.09 a barrel.
Outer-month contracts have steadily been climbing through the year, but their appeal has grown as volatility spiked at the front end of the curve, particularly for investors who want to hold positions for longer, said Eric Wittenauer, energy analyst at Wachovia Securities.
"Though we could see $150 oil in the next couple of weeks, a longer-term bet on $150 or $200 or whatever your target is...just gives you more time to get there," Wittenauer said.
Front-month June reformulated gasoline blendstock, or RBOB, settled up 9.21 cents, or 2.8%, at $3.3965 a gallon. June heating oil settled 13.34 cents higher at $3.9084 a gallon.
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