Oil hits record high $80 a barrel
Crude oil prices vaulted to a record high $US80 a barrel on Wednesday as dealers focused on tight inventories in the United States and potential supply disruptions from a tropical storm in the Gulf of Mexico.
The surge in oil prices came a day after OPEC agreed to a small production hike in an effort to soothe consumer nations' fears that soaring crude costs could slow economic growth.
"The OPEC outcome was not enough of a shocker to turn around a market that likes to read extremes," said Olivier Jakob of oil consultancy Petromatrix.
US crude settled up $US1.68 at $US79.91 a barrel, after setting a record high of $US80.18 a barrel earlier. London Brent crude rose $US1.30 to $US77.68 a barrel.
Adjusted for inflation, prices are still below the $US90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq war the following year.
US crude stocks fell 7.1 million barrels last week to their lowest level in eight months ahead of the winter heating season, government data released Wednesday showed.
"The reality is that the crude tightness in Europe and Asia has begun to affect the US market in a big way," said Antoine Halff, analyst at Fimat Research in New York. "In retrospect, it validates OPEC's decision to increase production."
Heating oil futures prices also struck a record Wednesday over $US2.22 a gallon, up more than three cents.
Tropical Storm Humberto formed in the US Gulf of Mexico, home to a quarter of US oil output, shutting the Houston shipping channel and spurring worries offshore production could be shut down.
Traders were also eyeing a drop in Alaskan oil output as BP performed seasonal field maintenance.
Strong oil fundamentals have lured investors looking to diversify away from markets dragged down by the subprime crisis, and dealers said fresh fund money continued to pile into energy.
"When you look at energy versus equities, equities has been going down and oil is going up," said Andy Weathers of Terra Verte Trading LP.
Experts said OPEC's deal in Vienna Tuesday to raise output by a half million barrels per day starting Nov. 1 was not enough to reverse rising energy prices.
The new OPEC output deal will reverse most of the 1.7 million barrels per day of cuts agreed by the group since October 2006 because the group was already pumping almost 1 million bpd above their nominal ceiling.
The US Energy Information Administration said the rise would not overcome tight supplies, but Energy Secretary Sam Bodman said he was pleased by the move.
"I was pleased that the OPEC folks made a judgment that they could increase the available supply," the US official said. "Right now we're not hurting for oil inventories."
The surge in oil prices came a day after OPEC agreed to a small production hike in an effort to soothe consumer nations' fears that soaring crude costs could slow economic growth.
"The OPEC outcome was not enough of a shocker to turn around a market that likes to read extremes," said Olivier Jakob of oil consultancy Petromatrix.
US crude settled up $US1.68 at $US79.91 a barrel, after setting a record high of $US80.18 a barrel earlier. London Brent crude rose $US1.30 to $US77.68 a barrel.
Adjusted for inflation, prices are still below the $US90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq war the following year.
US crude stocks fell 7.1 million barrels last week to their lowest level in eight months ahead of the winter heating season, government data released Wednesday showed.
"The reality is that the crude tightness in Europe and Asia has begun to affect the US market in a big way," said Antoine Halff, analyst at Fimat Research in New York. "In retrospect, it validates OPEC's decision to increase production."
Heating oil futures prices also struck a record Wednesday over $US2.22 a gallon, up more than three cents.
Tropical Storm Humberto formed in the US Gulf of Mexico, home to a quarter of US oil output, shutting the Houston shipping channel and spurring worries offshore production could be shut down.
Traders were also eyeing a drop in Alaskan oil output as BP performed seasonal field maintenance.
Strong oil fundamentals have lured investors looking to diversify away from markets dragged down by the subprime crisis, and dealers said fresh fund money continued to pile into energy.
"When you look at energy versus equities, equities has been going down and oil is going up," said Andy Weathers of Terra Verte Trading LP.
Experts said OPEC's deal in Vienna Tuesday to raise output by a half million barrels per day starting Nov. 1 was not enough to reverse rising energy prices.
The new OPEC output deal will reverse most of the 1.7 million barrels per day of cuts agreed by the group since October 2006 because the group was already pumping almost 1 million bpd above their nominal ceiling.
The US Energy Information Administration said the rise would not overcome tight supplies, but Energy Secretary Sam Bodman said he was pleased by the move.
"I was pleased that the OPEC folks made a judgment that they could increase the available supply," the US official said. "Right now we're not hurting for oil inventories."