LONDON – Oil is fast approaching $100 for the first time in two years, at the end of a momentous week which saw the market driven by the Brent contract’s looming expiry, supply-side worries and the US’s dwindling reserves.
Other major global commodity markets were also pushed higher by supply concerns. Coffee, maize, platinum, palladium and soya all forged multi-year peaks, while rubber stretched to a new record high.
London Brent oil surged to $99.20 a barrel late on Friday – touching the highest level since October 1, 2008 – and encroaching on the key psychological milestone of $100. “London’s benchmark Brent crude touched on highs above $99 ahead of February expiry on Friday,” VTB Capital analyst Andrey Kryuchenkov said.
“It is because it is the last day of trading for the February contract, and the market is rolling into March,” he added, and also cited volatile light trading volumes. March becomes the front-month contract next week. In recent days and weeks, oil prices have been catapulted higher as recent freezing winter weather stoked hopes of rising energy demand in Europe and elsewhere.
The market has also been propelled by the weaker dollar, supply problems and falling energy reserves in the United States. On Wednesday, Brent oil had leapt close to $99, boosted as the key Trans-Alaskan pipeline remained shut following a leak that struck over the weekend. The key link reopened on Thursday, dampening sentiment, but some analysts still predict that oil will strike $100 in the near future. “The recent rise in crude oil prices has prompted some speculation that we could well see $100 prices quite soon,” said CMC Markets analyst Michael Hewson. He added, “Brent crude pushed close to $100 on increased consumption on the back of the cold winter weather in Europe and a supply glut of (New York crude) which has depressed the US price, allowing the European price to surge ahead of its US counterpart.” In earlier deals on Friday, prices fell as traders had digested fresh moves by China, the world’s biggest energy user, to curb its high inflation, analysts said. Traders had reacted to China’s announcement that its central bank planned to raise the amount of money that lenders are required to keep in reserve as the Asian nation seeks to rein in its high inflation. The bank reserve requirement ratio would be raised by 50 basis points beginning on January 20, the People’s Bank of China said in a statement. On London’s Intercontinental Exchange, Brent North Sea crude for delivery in February leapt to $98.65 a barrel from $94.16 a week earlier. On the New York Mercantile Exchange, Texas light sweet crude for February, rallied to $91.23 a barrel from $89.26.
Oil prices spike towards $100 milestone
