Oil at $135 on concern OPEC can't stop rally

Crude oil rose to a record above $135 a barrel as OPEC ministers said they could do nothing to stop a rally that may be heading to $200 a barrel.

Oil has risen 19 percent this month as analysts increased their price forecasts because of supply constraints and demand growth. OPEC has "no magic solution" to the surge, Qatar's oil minister said. Prices are "out of the hands" of the organization, according to Libya's top oil official.

"Everyone's jumped on the bandwagon," said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp, Japan's biggest trading company, in Tokyo. "There's agreement that $200 is possible and that's getting more people into the market. We have very little supply cushion going forward and that's playing into the minds of investors."

Crude oil for July delivery rose as much as $1.92, or 1.4 percent, to $135.09 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest ever intra-day high. It was at $134.02 a barrel at 12:37 pm London time.

Brent crude traded above the New York contract for the first time in more than three months today as prices surged to a record in London and stockpiles at the delivery point for the US contract rose for an eighth week. Brent traded as much as 4 cents above WTI yesterday, before falling back to a discount.

The rising cost of energy and food has sparked concern inflation will quicken, preventing central banks from reducing rates to revive economic growth.

Brent for July settlement rose as much as $2.44, or 1.8 percent, to $135.14 a barrel on London's ICE Futures Europe exchange, an intra-day record. It was at $134.08 a barrel at 12:37 pm local time.

Oil for prompt delivery has surged about 8 percent in the past week while futures contracts for 2016 gained $20 to $142 a barrel. The surge has come as banks including Goldman Sachs Group Inc and Barclays Capital have increased their price forecasts, citing supply constraints.

Goldman raised its WTI price forecast for the second half of this year by 32 percent to $141 a barrel. Goldman analyst Arjun Murti previously said oil may rise to between $150 and $200 within two years.

'Moving fast'

"It was less than a week ago that Goldman Sachs was publishing the $141 a barrel report and the futures are moving so fast that under the current volatility, that goal could already be reached within the end of next week," Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland, said in an e-mailed report.

OPEC has "no magic solution" to record crude prices, Qatar's oil minister Abdullah bin Hamad al-Attiyah said yesterday. "We are producing at our maximum," Abdullah bin Hamad al- Attiyah said in a phone interview from Doha. "We don't see a shortage in supply."

The Organization of Petroleum Exporting Countries, which produces 40 percent of the world's oil, has no plans to react before its scheduled meeting in September because there is nothing it can do, the minister said.

Prices may reach $200 a barrel as maximum output from OPEC fails to prevent speculators from driving prices higher, said Shokri Ghanem, the chairman of Libya's National Oil Corp.

Agencies

(China Daily 05/23/2008 page17)