U.S. oil roared to its highest closing price in over 13 years on Wednesday, as a drop in already low gasoline inventories sharpened the threat of a supply crunch that could hurt economic growth.
U.S. light crude futures rose 70 cents to settle at $38.18 a barrel, nearly two percent higher. In London, May Brent crude ended 85 cents, or 2.6 percent, up at $33.53.
It was the highest settlement for U.S. crude since October 1990.
Prices jumped after the Energy Information Administration, an arm of the U.S. Department of Energy, released its latest snapshot on the world’s biggest oil market. The report showed a further 800,000 barrels decline in gasoline stocks to 199.6 million barrels.
U.S. gasoline supplies are running 5 percent below the five-year average, sparking concerns refineries will struggle to build supplies in time for summer holiday driving demand.
“What we’re seeing now is that some funds had moved to the side making sure there wasn’t a bearish surprise, and now they are rotating back into the long side,” said Jim Ritterbusch, president of Ritterbusch and Associates.
Prices well above last year's
U.S. light crude prices have averaged almost $35 a barrel so far in 2004, well above 2003’s average price of $31, which was the highest in more than two decades.
At the day’s settlement, crude futures had risen $4.31, or nearly 13 percent, since Feb. 10, when OPEC decided it would cut official production quotas by 4 percent from April 1.
OPEC cuts plans and rocketing Asian demand from China and India have combined to push prices to levels which consuming countries fear could hurt economic growth.
The head of Germany’s export industry association said on Tuesday that oil prices pose a bigger risk to Germany’s economic recovery than the euro’s exchange rate.
The surge in price led the United States to spend an extra $200 million on oil in January versus December, even though it imported eight million fewer barrels, according to the U.S. Commerce Department.
U.S. trade deficit: $43.1 billion
In January, the U.S. trade deficit widened to a record $43.1 billion. Economists say the oil price surge was the spoiler.
OPEC ministers agreed last month to eliminate 1.5 million barrels per day of supply above existing quotas and cut official production limits in April by one million barrels per day to 23.5 million barrels per day.
While most OPEC ministers have said they intended to implement the April cuts, there have been few signs of cutbacks in March.
Petrologistics, a tanker tracking consultant group, has told clients it expects the 10 OPEC members with quotas to produce 25.63 million barrels a day in March, down just 150,000 barrels per day from 25.78 million barrels a day in February.
One OPEC member, Nigeria, has already apparently reversed its initial cutback plan and added up to 250,000 barrels per day of extra crude at the last minute for April exports.
