REUTERS
Posted online: Monday, June 27, 2005 at 1008 hours IST
SINGAPORE, JUNE 27 : Oil prices leapt one per cent to a record above $60 a barrel on Monday as robust US demand appeared undaunted by soaring fuel costs, threatening to strain global production capacity later this year.
US August crude oil futures traded as high as $60.47 a barrel, up 63 cents, extending a rally that has added 12 per cent to prices in two weeks and 39 per cent since January.
Oil was up 61 cents at $60.45 a barrel by 0216 GMT, surpassing the $60 mark for the first time since it began trading on the New York Mercantile Exchange in 1983.
London Brent crude was up 59 cents at $58.95 a barrel, also a new record.
"It really has been a momentum-driven push to $60 over the past week, we've seen the funds really pile in hard in an effort to push it over (that level)," said Daniel Hynes, resource analyst at ANZ Institutional Banking.
Prices have soared as investors bet refiners and producers would struggle to meet peak winter demand in the world's biggest energy consumer. Speculators boosted their net long positions in US crude to nearly 20,000 lots last week.
While high prices are eroding strength from a world economy already vulnerable to upsets, the overall picture remains solid, central bankers meeting in Switzerland said at the weekend.
This has encouraged speculators to keep testing consumers' ability to absorb higher costs, with some analysts saying only a significant pull-back in demand -- due to conservation, fuel switching or an economic slowdown -- will tame prices.
"The market is testing higher to see what price levels this demand can endure," said Naohiro Niimura, vice president at the derivative products division of Mizuho Corporate Bank.
Crude oil contracts for delivery through next August are now all trading above $60 a barrel as dealers see tight market conditions running for at least another year, especially for distillate products such as heating oil and diesel.
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