Oil climbs to US$78, eyes all-time high

LONDON – Oil edged higher near US$78 a barrel yesterday, driven towards an all-time high by an influx of speculative fund money and tightening crude supplies from the North Sea.

London Brent climbed to a fresh 11-month high of US$78,40 in earlier trade, just 25 cents shy of the record peak reached last August. By 1326 GMT, the benchmark was trading up 14 cents at US$77,71.US crude rose three cents to US$73,96 a barrel.Seasonal maintenance on North Sea oilfields, coupled with unanticipated outages, has helped extend oil’s near three-week rally, lifting Brent by more than US$7 since late June.”The markets will retain focus on North Sea production problems and refinery outages in the week ahead.These factors will continue to support prices at the current levels,” said David Moore at Commonwealth Bank of Australia.Speculative flows into commodities have also fuelled the run-up, led in part by fears a rush by US refiners to produce enough gasoline this summer will leave them short of heating fuel in the winter.”The direction of crude oil remains firmly in the hand of the large speculative funds,” said Olivier Jakob of Petromatrix.Speculators in the New York Mercantile Exchange crude oil market boosted net long positions to a record high in the week ending July 1 in a bet prices would rise, the Commodity Future Trading Commission (CFTC) said on Friday.Speculative net long positions in the NYMEX heating oil and gasoline markets also rose, hitting their highest levels in years, the CFTC data showed.Longer-term investors have also found signs of encouragement to invest due to the shift in the oil market’s structure to backwardation, where forward contracts are cheaper than prompt contract.This allows funds to profit from rolling their positions forward each month.But some traders said backwardation was probably exaggerated ahead of the expiry of the August contract on Monday.Forecasts for rising demand also reinforced bullish sentiment and supported prices, analysts said.Opec said world oil demand next year will grow moderately while supply from rival producers will expand, reducing the need for crude from the producer group.Technical analysts warned that the market was due for a short-term correction as Brent prices have settled higher in 10 of the last 11 sessions.World oil demand will grow more quickly in 2008, though more output and refinery capacity should ease pressure on supply, the International Energy Agency said on Friday.Nampa-ReutersBy 1326 GMT, the benchmark was trading up 14 cents at US$77,71.US crude rose three cents to US$73,96 a barrel.Seasonal maintenance on North Sea oilfields, coupled with unanticipated outages, has helped extend oil’s near three-week rally, lifting Brent by more than US$7 since late June.”The markets will retain focus on North Sea production problems and refinery outages in the week ahead.These factors will continue to support prices at the current levels,” said David Moore at Commonwealth Bank of Australia.Speculative flows into commodities have also fuelled the run-up, led in part by fears a rush by US refiners to produce enough gasoline this summer will leave them short of heating fuel in the winter.”The direction of crude oil remains firmly in the hand of the large speculative funds,” said Olivier Jakob of Petromatrix.Speculators in the New York Mercantile Exchange crude oil market boosted net long positions to a record high in the week ending July 1 in a bet prices would rise, the Commodity Future Trading Commission (CFTC) said on Friday.Speculative net long positions in the NYMEX heating oil and gasoline markets also rose, hitting their highest levels in years, the CFTC data showed.Longer-term investors have also found signs of encouragement to invest due to the shift in the oil market’s structure to backwardation, where forward contracts are cheaper than prompt contract.This allows funds to profit from rolling their positions forward each month.But some traders said backwardation was probably exaggerated ahead of the expiry of the August contract on Monday.Forecasts for rising demand also reinforced bullish sentiment and supported prices, analysts said.Opec said world oil demand next year will grow moderately while supply from rival producers will expand, reducing the need for crude from the producer group.Technical analysts warned that the market was due for a short-term correction as Brent prices have settled higher in 10 of the last 11 sessions.World oil demand will grow more quickly in 2008, though more output and refinery capacity should ease pressure on supply, the International Energy Agency said on Friday.Nampa-Reuters