Oil prices ease after record highs

OIL prices eased back below $59 a barrel as the market paused for breath following the record highs hit on Monday.

Some analysts expect the price to go above $60 per barrel anytime soon, driven by fears of shortages toward the end of the year.

The beginning of the week saw prices surge past $59 for the first time, hitting a peak of $59.52 in New York.

Early yesterday light sweet crude for July delivery was trading electronically at $58.76 per barrel on the New York Mercantile Exchange. Brent Crude was trading in London at $56.93.

Earlier on Monday, the oil price was driven to a record level as traders speculated that rising demand in Asia and North America cannot be easily met by producers including OPEC.

From a European perspective, the relentless rise in the price of oil coupled with a fall in the value of the euro to close to $1.20 in recent weeks augurs badly for the cost of oil and gas going forward.

“Things are bad and they are going to get worse” was how Conor Faughnan, the spokesman for the Automobile Association of Ireland, put it.

Recently, for the first time ever, the price of oil went over €40 per barrel.

With the continuing weakness in the euro that has serious implications for European domestic and commercial fuel prices, Mr Faughnan said.

Since January the price of a litre of petrol has gone from 95 cents to over 100 cents at the start of June.

The AA spokesman warned that when the next survey is published in July he expects prices will have risen well above the national average of 101 cent per litre.

The strong euro protected Europe from oil price hikes for most of this year, but that is about to change, he said.

The price of oil and the strength of the euro are the two key variables that determine what we pay for our domestic fuel and our petrol, said Mr Faughnan.

Given the current situation the outlook for Irish consumers is bad, he said.