Oil prices hit record high, look set to break US$80

Oil prices hit record highs of more than U$78 per barrel on Friday, continuing to test uncharted territory as Israel's offensive in Lebanon and the Iran nuclear issue sparked fears of a wider Middle East conflict, dealers said.

They said it is probable that oil will break US$80 per barrel soon, with the upcoming September contract already quoted at above US$79.

The price of US$100 per barrel has been mentioned as a distant possibility.

At 2:10 pm (0615 GMT), New York's main contract of light sweet crude for delivery in August was quoted at US$78.10 per barrel, up US$1.40 from its last settlement of US$76.70.

Oil pushed higher still to hit an all-time high of US$78.40 in after-hours electronic trade before some profit-taking took it off the top.

Brent North Sea crude for August delivery was at US$77.52, down from its peak price of US$77.76.

"It seems like hitting US$80 a barrel is inevitable," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

"We're in uncharted territory. It is a result of a confluence of a number of geo-political events in a tight market that shows healthy demand growth," he said.

"The factors are getting together in a tight market and we haven't even got our first hurricane in this US hurricane season, so pricing is going to remain strong."

Shum said that oil at US$100 a barrel "is still quite a bit off from where we are today (but) there is certainly the potential for it to hit that."

Tony Nunan, the Tokyo-based manager for energy risk management at Mitsubishi Corp, agreed US$100 oil is now a possibility.

"I don't want to cause panic in the marketbut I think the market has to understand that triple-digit (oil prices) are not a fantasy anymore and are definitely possible," he said.

"We'll definitely be seeing US$80 (per barrel). It could either gradually escalateor it could explode."

Liu Gu, a senior oil analyst with Shenzhen-based Guotai Jun'an Securities (Hong Kong) Co Ltd, said increased oil prices would take toll on China's economy because more than 40 per cent of its supply comes from imports.

"The government may increase the price for processed oil again," Liu said.

On May 24, the National Development and Reform Commission, the country's industrial planning body, raised the prices of gasoline, diesel oil and kerosene for aviation by 500 yuan (US$62.5) per ton.

Source: China Daily