Oil prices hit record $66 a barrel

WORLD oil prices touched $66 yesterday, creating a fresh record and continuing the two-year upward spiral that has plagued financial markets with threats of a global economic slowdown.

The new record of exactly $66.00 per barrel puts the price of oil at more than double the price immediately after the September 11 attacks on New York and Washington. Oil prices have soared more than 50% since January, when barrels were on offer for $43.

Hectic trading saw prices smash through the $65 barrier in early trading on New York’s NYMEX exchange yesterday, hitting a high of $65.40. Prices then eased to $64.45 before bouncing back into record territory last night. In London, the price of benchmark Brent crude oil reached an all-time peak of $65.66.

Dealers put the latest surge down to an increase in buying by speculators, gambling on oil prices rising as high as $100 per barrel within weeks and hoping to cash in on future gains, as well concerns over rocketing demand and potential supply problems.

Supply pressures have been highlighted in recent weeks thanks to a deteriorating security situation in the Middle East.

This has triggered unease among buyers that fear terrorist attacks on major oil production facilities in the oil-rich region. These have been compounded by isolated problems at a number of large oil refineries in America and in the North Sea, which have also threatened to disrupt supply.

Pressure on prices has been heightened by long-standing worries over surging demand from developing economies such as China and India.

Some analysts moved to ease concerns. They said current prices remained far short of those during the global oil crisis in the late 1970s, when inflation is taken into account. Peaks recorded in 1979 equate to about $80 per barrel in today’s money, they said.

Ulster Bank economist Niall Dunne said yesterday’s trading patterns were influenced by two things.

These are the increased demand for petrol in America during the summer, and concerns production capacity would be stretched by the arrival of winter in the northern hemisphere.

But the continued upward pressure on prices will increase fears that global economic growth will be damaged. Analysts say every $10 hike in oil prices shaves around 0.5% off growth figures. Bloxham Stockbrokers economist Alan McQuaid said earlier this week that higher oil prices would eventually feed through to inflation figures and make the prospect of an interest rate hike more likely.

Motorists and airlines have felt the implications of this year’s developments.

Some airlines have raised ticket prices to cope with increased fuel costs.