Oil Prices Crudely Crack Record: $58.60 A Barrel

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Oil prices soared on Friday wiping away the previous record of $58.28 set back in early April. Trading on the July contact settled in at $58.47 and since trends don’t show signs of slowing, most experts expect the $60 a barrel mark shortly, maybe even next week.

Gasoline futures settled up a nickle to $1.65 a gallon and heating oil remained static at $1.65. Brent crude in London for the August contract also traded up $1.75 to $57.87 a barrel.

A recent energy conference sponsored by Canadian bank RBC seems to support this theory. Various industry executives see oil prices going back down to $35 a barrel in the next couple of years.

“The effects of rising oil prices on global economic growth and the demand for energy in China continue to impact the fortunes of the energy industry,” said Kurt Hallead, managing director at RBC Capital Markets. “While this trend will likely continue, concerns about terrorism have largely abated thereby substantially reducing the supply disruption premium.”

Oddly enough, as prices continue at record levels, consumer demand in the U.S. continues unabated. Demand is higher this year, with prices substantially higher than it was last year in both heating oil and gasoline. The laws of economics dictate the price will continue to climb until people can’t afford it anymore. The question is how far away is that time.

RBC sponsored a survey at the event. RBC said, based on those surveyed, gas would top out at about $2.60 a gallon. That’s still close to $20 to fill up the gas can for the lawnmower.

This just demonstrates how tight oil production is right now. The slightest little thing and the prices spikes even higher. At the current rates of increase, $60 a barrel will probably hit early next week. Many experts, particularly OPEC, maintain there is plenty of crude on the market but the supplies are bottlenecked at refineries around the world.

Many refineries are a problem too. The U.S. hasn’t built a new refinery since 1976. Many existing refineries have grown and expanded but as various problems occur at those refineries, it feeds the perception they are ready for the junk heap. Especially since others suggest they bottleneck the oil supply. Also, in order to be profitable, refineries have to run wide open. Right now, the refineries run at over 96% capacity. The U.S. still imports a fair amount of gas for the oil companies to keep their European refineries profitable as well.

The trader feeling seems to be there won’t be enough oil to fill supplies in the fourth quarter, when distillate demand climbs. They believe the production levels will remain tight for the coming months because OPEC has hit their peak for production, pumping all they can and big non OPEC nations like Russia seem winding down overall oil production, particularly after recent incidents surround Russian Oil company Yukos.

John Stith is a staff writer for WebProNews covering technology and business.

Oil Prices Crudely Crack Record: $58.60 A Barrel
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