Oil Hits $90 Per Barrel Before Marginal Retreat
Oil prices fell today (Dec. 8) in Asia as traders locked in profits after crude rose above $90 a barrel for the first time in more than two years, the Associated Press reported.
Benchmark oil for January delivery was down 86 cents to $87.83 a barrel at late afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange.
The contract hit $90.76 on Tuesday, the highest price since Oct. 8, 2008, before pulling back to settle at $88.69, down 69 cents.
The pull back is not surprising, said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. “It is primarily profit-taking after crude breached the $90 level in New York.”
The rally Tuesday came as President Obama and Republican leaders hammered out an agreement to extend Bush-era tax cuts. A cold snap also swept through Europe and the U.S., lifting demand for fuel.
Some analysts now predict that oil will hit $100 per barrel sometime next year. They point to rising demand from China and other emerging economies. OPEC countries can crank up production to meet that demand now, but their ability to do that is expected to decline over the next few years.
Shum, however, said the $90 level wasn’t sustainable for now amid persistent concerns about the spread of Europe’s debt crisis to Portugal and Spain. This boosts the dollar and depresses the oil price as it makes the commodity more expensive for investors holding other currencies.
Fears that China may raise interest rates are also dampening the oil market, which is likely to trade between $85 and $90 in the near term, Shum said.
Traders will seek more clues on the strength of crude demand from U.S. government supply figures later today. The American Petroleum Institute’s report Tuesday was mixed, showing a drawdown in crude oil stocks but a rise in distillate and gasoline inventories.
In other Nymex trading in January contracts, heating oil fell 1 cent to $2.46 a gallon, gasoline futures gave up 1.4 cents to $2.31 a gallon and natural gas rose 1 cent to $4.41 per 1,000 cubic feet.
In London, Brent crude fell 46 cents to $90.93 a barrel on the ICE Futures exchange.