Oil surges near $88 a barrel

Javier Blas
Financial Times
Tuesday October 16, 2007

Flashback: $200 Dollar a Barrel Oil Is Bilderberg Plan To Destroy Middle Class

Oil prices rose to fresh records on Tuesday, with US crude surging near $88 a barrel, and pushing gold to a new 28-year high as investors feared a spike in inflation.

The threat of a Turkish military operation against Kurdish militia in northern Iraq contributed to the oil price increase, but traders said the main factor of the rally was low US inventories, strong demand and a timid production increase from the Organisation of Petroleum Exporting Countries.

Francisco Blanch, chief commodities strategist at Merrill Lynch, added that an early winter cold snap or a serious geopolitical problem in the Middle East “could drive oil prices even to $100 a barrel.”

Doug Leggate, of Citigroup in New York, added: “A run to $90 is now seen as reasonable.”

Nymex November West Texas Intermediate rose to a high of $87.97 a barrel and later was trading $1.57 higher to $87.70 a barrel. ICE November Brent rose to an all-time high of $84.26 a barrel.

Low inventories prompted Opec recently to agree to boost output by 500,000 barrels a day from November. The cartel opted for a meagre increase on concerns about the strength of the global economy and oil consumption. However, Opec on Monday acknowledged that demand for its crude oil will be stronger than expected this winter.

“Downward [economic] pressure has receded in recent weeks, following the US Federal Reserve’s decision to cut US interest rates by half a percent,” Opec said.

Paul Horsnell, of Barclays Capital in London, said that demand growth was strong relative to non-Opec weak supply increases.

Spot gold prices in London surged to a 28-year high of $766.60 an ounce as the oil price jump sparked worries about an inflation spike and investors continued to seek refuge against a weakening US dollar. Gold hit an all-time record of $850 an ounce in January 1980.

Precious metals traders reported strong buying from Japanese investors.

Spot platinum traded at $1,420 an ounce, just below Monday’s all-time record of $1,428 an ounce.

The World Gold Council on Monday cut its forecast for India’s gold consumption this year to 15-25 per cent, in the first sign that record high gold prices are beginning to dent jewellery demand, one of the main supports of gold’s recent price surge.

Earlier in the year, the WGC, which is backed by the gold industry, had predicted that gold consumption in India, the world’s biggest gold consumer, would rise almost 40 per cent this year.

Ajay Mitra, WGC managing director in India, said: “Due to the spike in prices, we are a little cagey.”

Base metals were also stronger, with the exception of copper with traded flat at $8,155 a tonne. Aluminum rose 0.1 per cent to $2,492 a tonne while lead rose 0.3 per cent to $3,823 a tonne.

Coffee continued to slide as rain fell over Brazil, the world’s largest coffee producer. Euronext.Liffe November Robusta coffee prices in London fell 2.3 per cent to $2,028 a tonne, below a 10-year high of $2,234 a tonne reached last Friday.

Wheat prices in Chicago fell to $8.26 a bushel, the lowest level in four weeks.