Oil Rises Above $98 to a Record on Forecasts U.S. Supplies Fell

By Grant Smith and Nesa Subrahmaniyan


Nov. 7 (Bloomberg) -- Crude oil rose above $98 a barrel for the first time in New York on forecasts U.S. stockpiles fell for a third week and as the dollar tumbled to a record low against the euro, spurring demand for commodities

BP Plc and ConocoPhillips yesterday evacuated oilrig workers in the North Sea before a storm, heightening supply concerns before the U.S. Energy Department's report later today. The dollar slumped, pushing up prices of commodities denominated in the currency, after China signaled plans to diversify the country's $1.43 billion in foreign-exchange reserves.

``I think the $100 mark is inevitable now,'' said Michael Davies, an analyst at Sucden (U.K.) Ltd. in London. ``We're expecting another draw in crude stocks today, and that could be another thing everyone jumps on.''

Crude oil for December delivery gained as much as $1.92, or 2 percent, to $98.62 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. It was at $98.58 at 11:01 a.m. in London. Futures have climbed 67 percent in the past year.

Brent crude oil for December settlement rose as much as $1.93, or 2.1 percent, to a record $95.19 a barrel on the London-based ICE Futures Europe exchange. It was last at $94.84.

Workers on ConocoPhillips's Ekofisk A, B and C platforms, as well as Eldfisk A and B, were being moved to land or to safer North Sea sites yesterday, said Kurt Mikkelsen, a ConocoPhillips spokesman. BP is moving 150 workers from its Valhall field and expects the platform's 80,000 barrel-a-day oil and gas output to come to a halt later today, spokesman Jan Erik Geirmo said.

`Matter of Time'

``The $100 jackpot is imminent now, despite the fact there aren't really oil fundamentals that can justify such a level,'' said Kamel al-Harami, an independent oil analyst in Kuwait City. ``It is only a matter of time for both consumers and producers to be hurt.''

Prices have passed the previous all-time inflation-adjusted record reached in 1981, when Iran cut exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, the Energy Department said, or $84.73 in today's money.

Oil has risen 60 percent in U.S. dollars this year compared with 44 percent in euros, 53 percent in yen and 50 percent in British pounds.

``There's so much fund money waiting on the sidelines, it's not worth getting in the way,'' said Sucden's Davies. ``The weak dollar makes it cheaper for foreign investors to buy oil. The flip-side is oil producers aren't receiving as much profit to invest in future infrastructure.''

China Demand

Energy demand in China, the world's second-biggest oil consumer, may more than double by 2030 compared with 2005, the International Energy Agency said in its World Energy Outlook 2007 report published today.

Gold reached a 27-year high and silver rose to the most in 26 years as rising oil prices and a slumping dollar deepened concern that inflation will accelerate. Wheat, corn, soybeans and palm oil also gained.

Today's Energy Department report will probably show U.S. oil stockpiles fell 1.5 million barrels last week, based on the median estimate in a Bloomberg News survey of 16 analysts. Inventories held 312.7 million barrels on Oct. 26, the Energy Department reported last week.

Refiners probably used 86.8 percent of their plant capacity, 0.6 percentage points more than a week earlier, and the first increase in four weeks, according to the survey.