Oil hit a record high above $79 a barrel today, propelled by an unexpectedly large drop in US crude oil stocks that followed only a small output increase from Opec ahead of peak winter demand.
US light crude for October delivery set a record high of $79.29 a barrel, beating the previous record of $78.77 reached on August 1st.
US crude was 50 cents higher at $78.73 a barrel earlier. London Brent crude was up 30 cents at
A British Petrolium refinery on the shore of Lake Michigan in Indiana, US.
$76.68. Crude oil stocks in top consumer the United States fell 7.1 million barrels last week, according to the US Energy Information Administration. Analysts had expected a fall of 2.4 million barrels.
Opec agreed to raise crude output by 500,000 barrels per day (bpd) from November 1st at its meeting in Vienna yesterday, in a gesture to consumer nations concerned about the economic impact of high oil prices and rapidly diminishing fuel stocks.
"The Opec outcome was not enough of a shocker to turn around a market that likes to read extremes," said Olivier Jakob of oil consultancy Petromatrix.
The new output deal from the Organization of the Petroleum Exporting Countries will reverse most of the 1.7 million barrels per day of cuts agreed by the group since October 2006.
The 10 countries bound by that agreement were already pumping almost one million bpd above their nominal ceiling.
"It legitimises 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.
"So, anything short of 1 million barrels a day looking ahead to winter balances would not be enough."
Opec had to balance consumers' concerns about shrinking stocks of oil ahead of winter with fears of an economic slowdown in top consumer the United States that could dampen oil demand.
The International Energy Agency, which has been urging Opec to pump more oil, predicted world oil demand will grow more slowly than expected in the last quarter of 2007 and next year. The IEA's latest monthly report, published today, also suggested high prices might further curb consumption.