Oil still hovering around the $125’s on supply and demand concerns

Tammy Wall
14 May 2008

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Oil has surged since slipping as low as US$110.53 a barrel on May 1. Investors have seized on disruptions to crude oil supplies in the North Sea and Nigeria as well as galloping demand for distillate fuels, a category that includes diesel fuel and heating oil.Strong demand for diesel fuel in Europe, with the growing use of distillates to power generators to supplement strained power grids in fast growing emerging markets, have cut into stocks of distillate fuel and pushed up prices sharply.

Crude oil was little changed in New York after rising to a record $126.98 a barrel on concern U.S. refiners may fail to meet demand for distillate fuels such as diesel and heating oil. Supplies of distillates in developed countries fell 6.7 percent to 477.6 million barrels in March from a year earlier, according to International Energy Agency estimates. Prices also gained after Iranian President Mahmoud Ahmadinejad told the state Fars news agency Iran was reviewing oil output. The market ``pushed the distillates up because there isn't much of it, so that does push crude up,'' said Rowan Menzies, head of research at Commodity Warrants Australia Ltd. in Sydney. Crude currently trading at $125.400 as of 8:20 am, GMT.

Finotec Analysis Team
14 May 2008

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