Crude oil hits $135.04 record on unexpected drop in US inventories

This article belongs to the NYMEX crude oil price records story arc.

bloomberg.com :

Crude oil rose to a record above $135 a barrel in New York [22 May 2008] on concern that supplies are inadequate after U.S. stockpiles unexpectedly dropped last week. Crude oil for July delivery rose to $135.04 a barrel in after-hours electronic trading on the New York Mercantile Exchange [NYMEX]. Oil for prompt delivery has surged 8.5% in the past week while futures contracts for 2016 gained $20 to $142 a barrel.

The crude-oil market is "well supplied," Libya's top oil official Shokri Ghanem said yesterday [21 May 2008], rejecting calls for OPEC to increase production to curb prices. Saudi Oil Minister Ali al-Naimi told reporters on May 16 that the kingdom is planning a 300,000 barrel-a-day output increase, to bring June production to 9.45 million barrels a day.

- See, I go on leave for just one day and the oil markets go nuts. But seriously. If you look at the NYMEX all-months futures price tables there it is : at the time of writing, crude oil for Dec 2016 delivery is going for $142.09. If you look down the "Most Recent Settle" column, you can see for yourself what people are talking about when they say that the oil market is now in contango - future prices are getting increasingly higher the further out in the future we go. That's quite a turnaround from the backwardation situation we had been having. Personally, I think $142 per barrel for 2016 delivery is quite the bargain. One could buy a couple of million barrels, wait a few years, and retire in style. Well, ok, maybe a couple of thousand barrels, for those with slightly smaller budgets.

As for OPEC, the peakoilers have good reason to be skeptical : they are not raising production because they a. wouldn't, or b. couldn't? I say they couldn't. The only country in OPEC which could is Saudi Arabia and they are raising by just 300 kbpd. If that's the widest they can open their taps after a personal visit by George Bush himself, I say we should be very worried. There's no 1 or 2 million barrels per day spare capacity from these guys. And then, chances are those 300,000 barrels per day are going to be Heavy Saudi Crude, exactly the type that US refineries have trouble processing. Great.

On to the technicals. $130 was sliced through like the proverbial hot knife through butter, and very convincingly so, overshooting by a full $5 to reach $135. Like I posted on the peakoil.com forums : We're on our way to $150, dudes! And it's not just me saying so, it's Goldman Sachs, it's T. Boone Pickens, it's Credit Suisse and a bunch of others. And I'd add that the next resistance levels are $150, $180, $200, $300 and over $400. But of course when everyone is piling into the same side of the boat a contrarian starts worrying, so at the same time, I'm eyeing support levels at $130 (*gag*), $120, $110, $100 and $90.

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