Crude oil futures rose to a record in New York for a third day on speculation U.S. demand for heating oil will deplete inventories this winter. ``Consumer demand is still very robust on the heating oil side and this is what's really driving these markets into a frenzy,'' said Arjuna Mahendran, Singapore-based chief Asian strategist at Credit Suisse Private Banking. ``There has been a steady decline in U.S. inventories.''
Crude oil for November delivery rose as much as 40 cents, or 0.7 percent, $55.33 a barrel in after-hours electronic trading on the New York Mercantile Exchange and traded at $55.29 at 1:07 p.m. Singapore time. Prices have risen in 19 of the last 22 sessions and are now 82 percent higher than a year ago. Oil rose as high as $55 a barrel on Friday, a day after the U.S. Energy Department said heating oil stockpiles fell 2.3 percent the previous week, leaving them 14 percent below their five-year average. Heating oil futures rose to a record $1.5555 a gallon in New York today. Oil also rose after Chicago Board of Trade President Bernard Dan said the U.S. economy can afford to pay as much as $75 a barrel for oil, indicating the jump in prices this year may fail to sap demand.
U.S. Economy
``I think that the U.S. economy is strong enough to absorb that,'' Dan said in Sydney yesterday on the Business Sunday program produced by Publishing & Broadcasting Ltd.'s Nine Network. ``I can't see it much higher than $75 unless there are disruptions in supply lines.'' The Chicago Board of Trade is the second-biggest U.S. futures market. Dan's comments echo a statement on Oct. 15 by Federal Reserve Chairman Alan Greenspan, who said prices aren't high enough to slow growth as much as in previous oil shocks. The surge in oil prices ``is likely to prove less consequential to economic growth and inflation than in the 1970s,'' he said. Greenspan's comments helped prices to close 17 cents, or 0.3 percent, higher on Friday at $54.93 a barrel, a record since crude-oil futures began trading in New York in 1983. ``This is a green light especially for the speculators and hedge funds to take prices to the roof,'' said Thomas McMahon, managing director of Pioneer Asia in Tokyo. ``It's quite surprising. I've never seen Washington say higher energy prices are okay.''
Recessions
High oil prices helped push the U.S. economy into recession in the 1970s and 80s, and caused demand to plunge by 19 percent between 1978 and 1983, according to the U.S. Energy Department. The Energy Department said last week that heating oil stockpiles fell 1.2 million barrels, or 2.3 percent, in the week ended Oct. 8. Heating oil for November delivery rose 0.64 cent, or 0.4 percent, to $1.5555 a gallon in electronic trading. ``The stocks of heating oil in the U.S. that came out late last week weren't as positive as some would like,'' Daniel Hynes, a resources analyst at Australia & New Zealand Banking Group Ltd. in Melbourne, said before trading started. Greenspan's comments ``certainly did underpin the $54, $55 range,'' he said. Prices may rise for a sixth week on concern supply cuts from Norway, Nigeria or Iraq may deter refiners from building winter fuel inventories, a Bloomberg survey last Thursday found. Twenty- four of 46 traders and analysts, or 52 percent, predicted an increase in New York oil futures this week. Nine expected prices to fall and 13 said they will be little changed.
Weekly Gains
Oil has risen every week since the week beginning Sept. 13, when Hurricane Ivan crossed the Gulf of Mexico, source of a quarter of U.S. oil, smashing rigs and shutting refineries. Daily oil output at platforms in the Gulf was down by 462,018 barrels, or 27 percent, from the 1.7 million barrels a day produced before the storm, according to a report Friday from the Minerals Management Service. ``It is vain to hope for a reduction of prices linked to a slowing of demand in the short term, unless winter proves itself to be exceptionally mild,'' said Frederic Lasserre, head of commodities economics research at Societe Generale in Paris. ///www.bloomberg.com