Supply fears send oil prices to new high
WASHINGTON — Oil prices zoomed to new highs Thursday as fears of a potential loss in supply from Russia returned, rattling global markets at a time of strong demand.
Crude futures surged by almost 4 percent, climbing above $44 per barrel in the United States and $41 per barrel in Britain.
Global oil prices had fallen sharply on Wednesday after Russian oil giant Yukos announced that the government, which is seeking repayment of $3.4 billion in back taxes for 2000, would nevertheless allow the company to use its bank accounts to “continue financing production activities.”
But on Thursday Russia’s Justice Ministry revoked the permission granted by bailiffs just a day earlier, saying Yukos could not use previously frozen funds to pay for day-to-day operations.
Traders fear the loss of output from Yukos at a time when global demand is strong and producers are struggling to keep up. Yukos pumps 1.7 million barrels of oil per day, or roughly 2 percent of total worldwide output.
“The Yukos situation has considerably worsened now,” said John Kilduff, senior vice president of the energy risk management group at Fimat USA Inc.
“The market cannot afford to have this oil off the market for any length of time and that’s the big fear,” Kilduff added.
Yukos has said that it does not have sufficient funds to pay the back-tax claims. But there has been no public response from the government, adding to concerns that Yukos may be dismembered and its parts sold cheaply as part of a Kremlin effort to gain further control over the economy.
The news caused the September contracts for light crude to surge $1.58 to $44.41 per barrel on the New York Mercantile Exchange — the highest settlement price in the 21 years the contracts have been traded. The previous settlement high was $44.15, set Tuesday.
On Wednesday, when concerns about Yukos briefly lifted, prices fell by $1.32 per barrel, helped along by a report that showed U.S. gasoline supplies built significantly last week.
In London on Thursday, Brent crude surged $1.42 to $41.12 on the International Petroleum Exchange, erasing the 94-cent decline from the previous day and surpassing the earlier record of $40.64 set Tuesday.
Oil prices have also been supported lately by concerns about the reliability of crude supplies from Iraq, where saboteurs have attacked pipelines and disrupted exports, and on fears of terrorist attacks in the United States.
Some analysts have forecast that the price of oil could rise as high as $50 a barrel by the end of the year if demand remains robust and there is no significant surge in global production.
Natural gas for September delivery gained 5.1 cents at $5.712 per 1,000 cubic feet.