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Oil nears $120 as demand from China increases

Financial Times: Oil nears $120 as demand from China increases

By Chris Flood
Published: April 23 2008 03:00 | Last updated: April 23 2008 03:00

Supply concerns and evidence of rising demand from China drove oil to a record and within striking distance of $120 a barrel yesterday.

Nymex May West Texas Intermediate reached $119.90 a barrel before easing slightly to trade $1.89 higher at $119.37. The May contract was due to expire yesterday and June WTI reached a session high of $118.98, up $2.35.

Nauman Barakat at Macquarie highlighted the fact that there was a large number (30,000 lots) of $120 per barrel WTI call options and said that these could exert an important influence, pulling oil prices to the $120 mark.

ICE June Brent gained $1.52 to $115.95 a barrel after touching a new peak at $116.75.

Chinese demand for oil is accelerating ahead of the Olympics with crude oil imports up by almost a quarter to 4.07m barrels a day in March, compared with the same month last year. For the first quarter, crude imports rose by 14 per cent compared with the same period last year.

In Nigeria, militants attacked two Shell pipelines on Monday as violence in the Niger Delta escalated. Shell had already closed 169,000 b/d of crude production after an attack last week.

Opec ministers have continued to blame rising oil prices on speculators and the weakness in the dollar at this week’s meeting of the International Energy Forum in Rome. But in an effort to reassure the market, Opec’s secretary general highlighted the cartel’s plans to expand capacity.

Abdalla Salem el-Badri said: “We are investing to increase capacity” .

“Right now, we have 120 projects worth $160bn just to increase capacity by 5m barrels a day to 2012.”

However, Opec has no plans to meet before September, suggesting little prospect of any relief on supplies before then.

US petrol prices breached $3 a gallon at the wholesale level for the first time on Monday. Nymex May RBOB unleaded gasoline rose 2 cents to $2.9996 a gallon yesterday, just short of Monday’s record of $3.0040.

European distillate supplies are set to tighten further with a strike planned at the Grangemouth refinery in Scotland next week. ICE May gas oil rose 1.4 per cent to $1,072 a tonne.

In agricultural markets, corn prices rose on concerns at the slow pace of US corn planting. Only 4.1 per cent of this year’s crop has been sown, compared with about 22 per cent normally at this time of year. CBOT May corn gained 19¾ cents to $6 a bushel.

Greg Wagner, senior commodity analyst at Ag Resource, warned that more poor weather could affect germination rates and lower yields below the USDA’s current projections.

CBOT May soyabeans gained 60 cents to $13.755 a bushel, while CBOT May wheat added 14¼ cents at $8.60 a bushel.

Strength in grain prices and concerns about the impact of export restrictions on tight global supplies pushed rice prices higher with CBOT May rough rice rising by the 50 cent daily trading limit to $23.85 a hundredweight.

Gold rose 1.1 per cent to $923.60 a troy ounce in late London trading, supported by dollar weakness and rising oil prices.

Gold appears to have lost some of its momentum in recent weeks. John Reade of UBS warned that gold prices would end the year lower than current levels as investor concerns over the worst of the credit crisis gradually faded.

Copyright The Financial Times Limited 2008 and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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