New York: Oil prices surged more than $3 to a record near $133 a barrel on Wednesday after a US government report showed a surprise drop in crude stockpiles, reinvigorating fears of a worsening supply crunch.
The gains bring oil up more than 30 per cent so far this year in a rally that has raised alarm bells in consumer countries like the United States, already hard hit by a housing slump and credit crisis.
"The market is in a very bullish mood and these statistics will do nothing to change that," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc. US crude gained $3.52 to $132.50 a barrel by 1755 GMT after hitting a fresh peak of $132.70. London Brent rose $4.34 to $132.18.
The surge came after the US Energy Information Administration showed crude stockpiles in the world's biggest energy consumer fell 5.4 million barrels last week, countering expectations for a build. [EIA/S] "This report gives the market every reason to rally," said Rob Kurzatkowski, analyst at optionsXpress in Chicago.
The fall in weekly inventories is matched by concerns supply problems will continue for years as production continues to fall short of growth in demand. Oil for delivery in 2016 rose above $142 a barrel on Wednesday -- making it the highest contract on the futures curve.
US Energy Secretary Sam Bodman said on Wednesday that there was nothing the government could do to ease the pain of soaring fuel prices for consumers and added that a rise in speculative investment in commodities was not behind the rally. "We have flat (oil) production ... and increasing demand," Bodman told reporters.
"I don't think anything can be done near term," he said. Crude prices have risen sixfold since 2002 amid rising demand from China and other developing countries.
Investors have also been drawn into the market by a weak US currency, which has made commodities relatively cheap for holders of other currencies. The dollar slid to a one-month low against the euro on Wednesday on expectations of higher euro zone interest rates.
US investor Warren Buffett, the world's richest person, said on Wednesday he expects the US dollar to continue to fall as the policies needed to correct the greenback's slide had yet to be implemented. The Organization of the Petroleum Exporting Countries (OPEC) has blamed oil's rally on speculation and the weak US dollar and has repeatedly rebuffed calls from consumer nations for more supply. OPEC's biggest producer, Saudi Arabia, said last week it has raised production by 300,000 barrels, but only to offset production problems from other members of the cartel.
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