Crude Oil Rises to Record Close on Signs OPEC Won’t Meet Demand

Crude oil rose to a record close of $78.23 a barrel in New York on speculation that OPEC’s agreement to increase production by 500,000 barrels a day will be insufficient to meet strengthening demand.

“We are going to need more than 500,000 barrels to meet rising demand,” said Tom Bentz, a broker at BNP Paribas in New York. “We are also up on speculation that the interest rates will be cut, which would help the economy and lead to higher demand for oil.”
Saudi Arabia led the group to adopt the increase from OPEC’s current production starting in November. Global oil consumption will rise 1.5 percent this year as production stagnates, the Energy Department reported today. The target will be 27.2 million barrels a day beginning Nov. 1, Kuwait’s Oil Minister Mohammed Abdullah al-Aleem said in an interview.

Global petroleum consumption will probably increase 1.27 million barrels to 85.7 million barrels a day this year, the Energy Department said its monthly Short-Term Energy Outlook. Demand will rise 1.51 million barrels, or 1.8 percent, to 87.2 million barrels a day in 2008, the report showed.

World oil production is expected to average 84.64 million barrels a day this year, up 14,000 barrels a day from 2006, according to the department. Output is forecast to rise 2.42 million barrels to 87.1 million barrels in 2008.

“The OPEC increase is down the road, we need the extra barrels now,” said John Kilduff, vice president of risk management at MF Global Ltd, the brokerage unit of Man Group Plc, in New York. “We’re expecting a further inventory decline tomorrow, which will leave us with spectacularly low gasoline stocks. This will leave us vulnerable to any refinery problems.”

Bloomberg