Associated Press

Budapest, June 20:

Fears that US refineries will be unable to cope with increasing demand in the second half of the year sent crude markets roaring Monday, with prices hitting a new intraday high near $60 a barrel. The kidnapping last week of six oil workers, including two Germans, in OPEC-member Nigeria also contributed to the momentum. “We have been expecting prices to come down for a while but this is clearly not the case. The rally is definitely sustained by gasoline demand in the United States posting a three per cent yearly growth, which is seen as extremely strong,” said Deborah White, energy analyst with Barclays Capital in Paris. “People are trying to push prices through $60,” she added. Light sweet crude for July delivery gained 35 cents to $58.82 by midmorning in Europe in electronic trading on the New York Mercantile Exchange. Oil workers in Norway, the world’s third-largest exporter, could begin a strike as early as Tuesday in a salary dispute that could cut a third from the country’s daily output of 3 million barrels.

On Friday, crude climbed as high as $58.60 per barrel before settling at $58.47, an increase of $1.89 on the New York Mercantile Exchange. That topped the exchange’s previous intraday high of $58.28 set on April 4. While Nymex oil futures are more than 50 per cent higher than a year ago, they are still well below the inflation-adjusted high above $90 a barrel set in 1980.

“Bulls believe the only thing that can cool the market is an erosion in demand, but so far there

are no signs of this,” said Energyintel analyst Matt Piotrowski. “They also focus on OPEC’s recent meeting as reinforcing the belief that the organization cannot cool prices.” The Organization of Petroleum Exporting Countries failed to soothe the market last week when it agreed to raise its daily output quota to 28 million barrels a day because its members had already been unofficially exceeding that level. Including Iraq, which is not bound by the 11-member cartel’s quota system, OPEC is pumping close to 30 million barrels a day, or about 35 per cent of global demand.

Analysts said unlike the record prices last year, which were driven largely by concern over geopolitical events in oil-producing countries such as Nigeria, Saudi Arabia, Iraq and Venezuela, this year’s trend has more to do with speculative buying, continued supply fears and limited excess production capacity. “This year we’ve had a confluence of factors driving up this rally: first, more hedge funds are allocating money to the red-hot oil markets; second, demand is outstripping supply; and third, capacity is tight in refineries and OPEC production facilities,” said Victor Shum, energy analyst at Texas-based Purvin & Getz. “The oil market is prone to price spikes because of capacity tightness, and this attracts speculators,” Shum said. Analysts also said demand for distillates in the summer - gasoline for vacationing Americans and diesel for generators of small businesses in China when power shortages occur - keep the market on edge.