Crude oil price likely to hit peak

Crude oil prices appear increasingly likely to hit the record in real terms record, reached during the second oil crisis in 1979, as nominal prices on Monday continued rising well above $90 a barrel.

West Texas Intermediate crude hit a fresh nominal all-time high of $93.20 a barrel on a combination of renewed geopolitical tension over Iran’s nuclear programme, weakness of the US dollar and low inventories.
The price leap came after Mexico said it was shutting about 600,000 barrels a day of oil output, or 20 per cent of its total, due to bad weather in the Gulf of Mexico. Authorities hope to restore output in the near term as the cold weather front moves away from the production and terminal areas.

WTI moved $1.34 higher in early trading on Monday to a fresh nominal all-time high of $93.20 a barrel. It later pared gains to traded$1.03 higher at $92.89. Brent crude oil also continued upwards, hitting for the first time the $90-a-barrel key level, before easing back to stand $1.15 higher at $89.84 a barrel.

Barclays Capital’s technical analyst said: “The bull channels keep our focus higher towards $93.45, with little standing in the way of $100 above there.”

In real terms, adjusted for inflation, oil is at its highest price since the early 1980s but still below its modern historical peak – equivalent to about $100-$110 a barrel in today’s money – reached in late 1979 after the Iranian revolution.

Oil traders said that strong speculative flows, Middle East tensions and supportive fundamentals could push crude oil prices towards, if not above, their real term record.

Even so, some analysts remain dismissive about the potential impact of reaching such a level, as the factors behind the price increase are different.

Financial Times