London, Sept. 13 (Reuters): Oil rose to an all-time high of $80.20 on Thursday after Hurricane Humberto forced the closure of some US Gulf refiners and stoked concerns of fuel shortages this winter.
Investors were also building up positions in the market, thanks to a market structure that can virtually guarantee favourable returns.
The US crude traded 21 cents lower at $79.70 a barrel, having eased from its new record. London Brent crude also shed 21 cents to $77.47.
US gasoline prices soared 1.7 per cent to $2.05 a gallon after Hurricane Humberto hit onshore Texas and shut oil shipping channels and three refineries. “There are so many things that affect the price of oil,” Hasan Qabazard, director of Opec’s research division, told reporters on Thursday.
“We have a storm working its way to the American facilities. We have an economic crisis, so many things are affecting prices,” he added.
The price of oil — when adjusted for inflation — is below the $90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq War the following year.
“Modest demand growth combined with no significant supply increases have caused oil inventories to decline sharply, creating backwardation in the oil forward curve, which is a very bullish signal,” said Jeffrey Currie of Goldman Sachs.
In a backwardated market, oil for delivery in the near term is more expensive than that for later shipment.
Investors make money by selling the more costly prompt oil and buying cheaper crude for later delivery.
The structure has been created in part by a belief among analysts and consumers that Opec will not pump enough oil to satisfy demand for fuel this winter. Opec agreed a small supply increase on Tuesday to try to wipe out the backwardation and soothe consumers, .
But analysts said Opec’s pact to raise output by 500,000 barrels per day (bpd) from November 1 was not enough to reverse a rally that has lifted prices by 31 per cent this year.
Market participants were also taking stock of crude inventories in the US that fell 7.1 million barrels last week to the lowest level in eight months ahead of the winter heating season. Analysts had expected a fall of 2.4 million barrels.
US light crude for October delivery was up $1.43 cents to $79.66 a barrel after setting a record high of $79.89 a barrel. London Brent crude was up $1.34 cents at $77.72.
“The reality is that the crude tightness in Europe and Asia has begun to affect the US market in a big way,” said Antoine Halff, analyst at Fimat Research in New York.