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Crude Oil Prices Surge to New High

October 26, 2004

Crude oil prices surged to a new high on Oct. 25 on supply concerns ahead of the winter, a possible petroleum-industry strike in Norway and data showing that China's big demand for oil is likely to increase, according to the Associated Press. Crude futures for December delivery hit a high of $55.67 on Oct. 25 in European hours electronic trading on the New York Mercantile Exchange, up 50 cents from its record close on Oct. 22 when the U.S. Energy Department reported a fifth straight drop in heating oil stocks. By late morning in Europe, prices had eased slightly to $55.36. New on the watch-list of supply worries was an announcement by the Norwegian Shipowners Association of a lockout affecting workers on nearly 100 offshore service vessels and shuttle tankers on the Norwegian continental shelf. The strike is set to take effect Nov. 8. Kevin Norrish, oil analyst at Barclays Capital in London, told the Associated Press that if the strike were to cut off all of Norway's exports, the result would be "pretty serious." "If it does go ahead, we are into $60 territory without a shadow of a doubt," he said. "The market's going to be very, very nervous about it indeed." Norway produces at least 3 million barrels of crude daily and is a crucial supplier of natural gas and distillate fuel. Analysts and traders said they also were on the lookout for increasing demand from China, which released third-quarter economic growth figures on Oct. 22 showing gross domestic product climbing 9.1 percent on year and 9.5 percent for the first 3 quarters of 2004. "China, that's the bullish factor, but immediately there is concern over the lockout in Norway adding to the Chinese (economic) reports. There doesn't seem to be any end to price rises," said Esa Ramasamy, oil editorial manager for energy reporting agency Platts. China is the world's second largest consumer of crude after the United States, and consumes more than 6 million barrels per day, the Paris-based International Energy Agency said in its latest report. There are no signs that demand from Beijing will decrease in 2005, the agency said. While crude futures prices are more than 80 percent higher than a year ago, they still need to reach $80 per barrel in order to surpass the all-time peak — in inflation-adjusted terms — set in February 1981. Crude has risen more than $10 in the past month alone, primarily on concerns over production in the Gulf of Mexico where over 23 million barrels remain shut in since Hurricane Ivan hit mid-September.
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