Oil Price Leaps After Sudden Drop In Supplies

Oil price leaps after sudden drop in supplies

http://business.guardian.co.uk/story/0,,2189353,00.html

Ashley Seager
Friday October 12, 2007
The Guardian

World crude oil prices jumped nearly $2 a barrel to within sight of their record high yesterday as key figures showed an unexpected drop in US oil supplies.

By late afternoon, the price of US light crude futures was around $83.24 a barrel, less than a dollar below the all-time record of $83.90 hit last month, as data showed an unexpectedly large drop in US crude supplies.

In London, November Brent crude rose $1.86 to $80.46 a barrel on the ICE Futures exchange.

The US market leads the world because the energy-hungry country consumes a quarter of global oil every day. Markets have also been nervous in recent weeks as the hurricane season begins which could disrupt oil production in the Gulf of Mexico.

Prices were also supported yesterday by an International Energy Agency report that concluded oil inventories held by the world's largest industrialised countries had fallen below their average over the past five years.

"No news was bearish today. Really that's all investors need right now to push energy prices higher," said James Cordier, head of Liberty Trading Group in the US.

Gold prices hit a 28-year peak of $749.30 an ounce on fears of supply shortages in South Africa and a falling dollar.

The higher oil and metals prices boosted stock markets around the world as oil and commodity shares moved higher. The FTSE 100 share index which surged nearly 100 points, or 1.4%, to close at 6,724.5, its highest in four months and just several points short of a seven-year high.

"Another strong performance. I think we are mirroring the developments in the US markets. We're seeing risk premiums return to more normal levels," said Darren Winder at Cazenove.