[NYTr] Booming Economy: Oil tops $80 a barrel despite OPEC's production boost

[All the News That Doesn't Fit]

AP via USA Today - Sep 12, 2007
http://www.usatoday.com/money/industries/energy/2007-09-12-oil-wed_N.htm?csp=34


Oil hits $80 a barrel on inventory drops

NEW YORK (AP) — Oil futures prices rose sharply Wednesday, briefly
climbing above a record $80 a barrel after the government reported a
surprisingly large drop in crude inventories and declines in gasoline
supplies and refinery activity.

The report from the Energy Department's Energy Information
Administration suggested oil supplies are tightening as demand remains
strong. That's why oil prices are rising despite OPEC's decision on
Tuesday to boost crude production by 500,000 barrels a day this fall,
analysts said.

Light, sweet crude for October delivery rose $1.68 to settle at a
record $79.91 on the New York Mercantile Exchange after rising as high
as $80.18 earlier.

Despite the rise, oil is still well below inflation-adjusted highs seen
in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980
would be worth $96 to $101 or more today.

Oil's recent advance has been largely due to speculative buying by big
investment funds, who are responding to a price structure in which oil
contracts for delivery in future months are cheaper than the near-term
contract, said Jim Ritterbusch, president of Ritterbusch & Associates
in Galena, Ill. FIND MORE STORIES IN: New York Mercantile Exchange |
OPEC | EIA | International Energy Agency | Jim Ritterbusch

That kind of structure signifies tight demand in the immediate future,
and is a buying incentive.

"This is a market that wants to run up on the slightest bit of
information," Ritterbusch said.

Prices were also being supported by worries a tropical depression that
formed in the western Atlantic on Wednesday will become a hurricane and
hit critical Gulf of Mexico oil and gas infrastructure.

"The National Hurricane Center says there's a good chance that could
get into the Gulf," Ritterbusch said.

October gasoline rose 3.49 cents to settle at $2.016 a gallon.

Nymex heating oil futures rose 3.64 cents to settle at $2.2191 a
gallon, while natural gas futures jumped 50.4 cents to settle at $6.438
per 1,000 cubic feet. Natural gas prices typically react strongly to
news of tropical weather due to the concentration of gas infrastructure
in the Gulf.

At the pump, meanwhile, the average national price of a gallon of gas
inched higher by 0.1 cent overnight to $2.815, according to AAA and the
Oil Price Information Service. Retail prices, which typically lag the
futures market, peaked at $3.227 a gallon in late May.

In its weekly report on petroleum inventories, the EIA said crude oil
supplies fell by 7.1 million barrels in the week ended Sept. 7, more
than twice the 2.7 million-barrel decline analysts had expected.

Gasoline inventories fell 700,000 barrels, slightly more than the
expected 500,000 barrel decline.

Refinery utilization fell 1.6 percentage points to 90.5% of capacity.
Analysts had expected a 0.1 percentage point decline. And inventories
of distillates, which include heating oil and diesel fuel, grew 1.8
million barrels, more than the 1.4 million-barrel increase analysts had
expected.

Crude imports fell by 674,000 barrels a day on average last week to
9.56 million barrels, while gasoline imports fell an average of 298,000
barrels a day to 1.02 million barrels a day.

Demand for gasoline averaged about 9.6 million barrels a day over the
last four weeks, about 0.9% above last year, EIA said.

Oil's run-up has perplexed some analysts, who expect demand for oil and
petroleum products to cool this fall.

"We're at records, but it doesn't appear to be sustainable," said Chip
Hodge, energy portfolio manager at John Hancock Financial Securities in
Boston.

Indeed, the Paris-based International Energy Agency on Wednesday
lowered oil demand forecasts for this year and next. Copyright 2007 The
Associated Press.