Rising futures: oil at $150 a barrel?

April 10, 2011 - 0:0
With Libya’s fighting moving increasingly into the OPEC nation’s oilfields and a weakening U.S. dollar, oil futures continue to soar. Light, sweet crude for May delivery — the most active contracts — are trading up by 83 cents at $111.13 a barrel in New York, a fresh two-and-a-half year high. Brent crude oil traded on the ICE in London is ahead by $1.53 at $124.20 a barrel, near 32-month highs. (Analysts generally attribute the spread between the two to the level of exposure European markets have to Libyan oil exports, which have slowed to a trickle with the spread of political unrest, and the access domestic markets have to U.S. stockpiles.) The U.S. Oil Fund (USO) is up 0.9% and within whiskers of setting a new high. Its sister U.S. Brent Oil Fund (BNO) is ahead by 1.4% this morning. Also helping support oil’s rise is a weaker U.S. dollar. The PowerShares U.S. Dollar Index Bullish (UUP) is down 0.6% now, touching its 52-week low. “Troubles in Libya mean Gaddafi has caused damage to the Sirte basin which has about two thirds of their oil, there’s dollar weakness and some very large fund action piling into the market in oil and base metals,” Rob Montefusco, an oil trader at Sucden Financial, told Reuters. Some are talking about Brent crude topping $150 a barrel as a near-term price target. “But if we get up there it will come off pretty quickly. I don’t think this is a sustainable rally because we’re not seeing real demand pick up,” Montefusco added. The civil war in Libya is now seven weeks old and shows little sign of coming to a quick resolution. International Energy Agency data shows that after 1991?s Gulf War, it took Kuwait two years to rebuild its oil production, which was at a similar level as Libya’s before the current conflict. (Source: blogs.barrons.com)