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Oil Trades Near $120 After Rising to Record on Demand Outlook


Bloomberg: Oil Trades Near $120 After Rising to Record on Demand Outlook 

By Sophie Tan

May 6 (Bloomberg) — Crude oil traded near a record $120.36 a barrel in New York on speculation demand will rise during the peak summer driving season in the U.S. and ahead of the Beijing Olympics Games.

A report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December. China is increasing refining capacity and boosting oil imports to meet rising demand for the August Games.

“The U.S. is entering the summer driving season in three to four weeks. There’s the Beijing Olympics and new refineries coming online in China, they are going to need to fill their stocks,” said Jonathan Kornafel, the director for Asia at Hudson Capital Energy in Singapore. “There are bad news coming out everyday on the supply side, it’s a scary picture right now.”

Crude oil for June delivery was at $120.08 a barrel, up 11 cents, at 12:19 p.m. in Singapore in after-hours trading on the New York Mercantile Exchange. Yesterday, futures reached an intraday record before closing 3.1 percent up at $119.97 a barrel, the highest closing price since trading began in 1983.

U.S. refining capacity utilization rose above 85 percent in the week ended April 18 for the first time since February as refiners increased output for the peak-demand summer months. The U.S. is the world’s largest energy user and China is second.

Nigeria Attack

A weekend attack in Nigeria, Africa’s biggest oil producer, forced Royal Dutch Shell Plc to reduce output, the Associated Press reported May 3, citing the company. The Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the assault.

MEND has targeted Shell-operated pipelines in Nigeria, forcing the company to halt 170,000 barrels a day of exports of Bonny Light crude.

Exxon Mobil Corp.’s Nigeria unit will probably return to its normal rate of oil production of about 860,000 barrels a day by the middle of the week following the settlement of a labor strike, a government spokesman said.

Brent crude oil for June settlement was trading at $118.13 a barrel, up 14 cents, at 12:20 p.m. Singapore time. Yesterday, the contract rose $3.43, or 3 percent, to a record close of $117.99 a barrel on London’s ICE Futures Europe exchange. Prices touched an intraday high of $118.58 a barrel.

Summer Demand

Gasoline demand typically climbs going into the summer months when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.

The U.S. lost fewer jobs than forecast last month and the unemployment rate fell to 5 percent in April from 5.1 percent in March, according to data from the Labor Department on May 2. Payrolls shrank by 20,000 workers, following an 81,000 drop in March.

“Oil prices started to rally last week in response to the U.S. jobs report and yesterday there is data to show a growth in services,” said Victor Shum, senior principal at consultant Purvin & Gertz Inc. in Singapore. “These are good signs for the U.S. economy as the slowdown is not going to be as deep as we thought and that means stronger oil demand.”

PetroChina Co. and China Petroleum and Chemical Corp., which account for 90 percent of the nation’s oil refining capacity, are expanding their plants and boosting imports to meet growing energy needs.

China Petroleum is starting commercial output this month at its 10 million metric-ton-a-year facility in Qingdao before the Olympic Games in the Chinese capital, parent China Petrochemical Corp. said last week.

“China accounted for a third of last year’s growth in global oil demand and will continue to counterbalance any drop in U.S. consumption,” Shum said “The Chinese refiners are stock building ahead of the Games to prevent fuel shortages and that will boost demand in the months before.”

To contact the reporter on this story: Sophie Tan in Singapore at[email protected].

Last Updated: May 6, 2008 00:42 EDT and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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