Oil hits record $80.18

Crude oil prices vaulted to a record high $80 a barrel on Wednesday [12 Sep 2007] as dealers focused on tight inventories in top consumer the United States ahead of peak winter demand. A rash of fires at BP's oil fields in Alaska's North Slope added to the record run. The surge in oil prices came a day after OPEC agreed to a small production hike in an effort to soothe consumer nations' fears that soaring crude costs could slow economic growth.

U.S. light crude for October delivery was up $1.62 at $79.85 per barrel at 2:30 p.m. EDT after setting a record high of $80.18 a barrel earlier. London Brent crude was up $1.12 at $77.50 a barrel. Crude oil stocks in top consumer the United States fell 7.1 million barrels last week to their lowest level in eight months ahead of the winter heating season, according to the U.S. Energy Information Administration. Analysts had expected a fall of 2.4 million barrels.

Experts said OPEC's deal in Vienna Tuesday to raise output by a half a million barrels per day starting November 1 was not enough to reverse rising energy prices. "It legitimizes the excess production that was there relative to OPEC's previous implied quota and not much more," said Harry Tchilinguirian, senior oil market analyst at BNP Paribas. The new OPEC output deal will reverse most of the 1.7 million barrels per day of cuts agreed by the group since October 2006 because the group was already pumping almost 1 million bpd above their nominal ceiling.

- 500,000 barrels per day out of worldwide consumption of around 84 million barrels per day isn't very much - it's just below 0.6%. What is really ominous is that crude oil prices are setting new record highs right after the OPEC announcement.

This looks a bit different from last year, when oil prices collapsed to the $60's and then $50's after hitting $78.40. From a technical analysis point of view, the developing double-top pattern that I was worrying about earlier could be considered invalidated. I am already asking myself : is $78 going to be the new floor?

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