Monday January 23, 2006

Oil for delivery in 5 years rises on supply concern

peakoil.com -> quote.bloomberg.com :

Oil traders are paying record prices to get crude almost five years from now, reflecting increasing doubts the oil boom will go bust. New York Mercantile Exchange futures contracts for December 2010 ended last week at $64.45 a barrel, the highest yet for that month. The price has risen 68% in the past year as investors speculated on further gains and refiners sought to lock in the cost of supplies. The 2010 crude contract on the New York Mercantile Exchange has exceeded $50 a barrel continuously for almost eight months. When it debuted almost two years ago, it was at about $27. Buyers of futures contracts are guaranteed oil deliveries at a set price and agreed-upon date.

"It's meaningful that there are people who are prepared to buy oil at that price" for delivery in 2010, said Ian Henderson, who manages $1.1 billion in JPMorgan's Natural Resources Fund in London, which had a return of 50 percent last year. "It's almost politically unacceptable to admit that supply isn't going to grow as fast as demand, but it's already doing that."

Crude oil for March delivery rose as much as 72 cents, or 1.1 percent, to $69.20 in electronic trading on the New York Mercantile Exchange. It was at $68.96 at 10:32 a.m. in Singapore, 41 percent higher than a year ago.

The prices for futures at the end of this decade and beyond reflect the views of those who think that oil output is near its peak and will start declining as older fields are exhausted, or of traders who doubt that enough will be invested to pump more, said John Waterlow, an analyst at Wood Mackenzie Consultants Ltd. in Edinburgh. Goldman Sachs Group Inc. analyst Arjun Murti, who roiled oil markets in March by saying crude may reach $105 a barrel, last month wrote that view may be conservative if the "peak oil" theory is right.

(2006-01-23 22:11:02 SGT) [Energy] Permalink

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