A blistering four-year rally in crude oil shows no sign yet of running out of steam and crude could top $80 a barrel this year, boosting fuel costs for consumers and businesses, analysts said on Tuesday.
London's Brent crude hit an all-time high of $72.20 a barrel
Under the wrong circumstances, you could easily see $80 being broken or even higher than that, said Kevin Norrish, an analyst at Barclays Capital. Any major loss of production is going to give us another major push up.
Oil has almost doubled in two years as increasing demand stretches producers and refiners, and worries mount about threats to supply. A wave of fund buying has helped power this year's rally as investors seek to beat returns available in equities or bonds.
Prices are nearing the inflation-adjusted peaks of over $80 hit in 1980, the year after the Iranian revolution, which some analysts say may prove to be the next peak for prices.
The question is where to set our sights next, said Deborah White, an analyst at SG CIB Commodities in Paris. The only cap I see coming up is on the order of $85 a barrel -- something equivalent in real terms to the highest we saw.
Analysts who use chart patterns to predict oil price moves said Brent has shown little sign of peaking with fresh buying into profit-taking price dips, despite being heavily overbought.
The gains, with last week's advance confirming an upside break out of a neutral triangle pattern, have left analysts looking at equality projections which flag $72.30, $75 and $76.90 as near-term targets.
U.S. crude from June through the end of the year has soared faster and further than the prompt May contract this month as dealers fear the risks to supplies will grow bigger in the latter half of the year.
There's a sense that Iran has heated up and if it's going to come to a head, it will be further out than May, said Tobin Gorey, analyst at the Commonwealth Bank of Australia.
Oil for September settlement rose as high as $74.06 on Tuesday and contracts only dip back below $70 from August 2009, suggesting traders expect oil to stay high for years.
Increasingly sharp words between Iran and the West over the Islamic Republic's nuclear program have increased worries that the dispute could cut Iranian oil exports, adding to actual losses in fellow OPEC members Nigeria and Iraq.
There's panic over Iran, said Julian Lee, oil analyst at the Center for Global Energy Studies. Neither Iran or the U.S. seems to have any interest in toning down the rhetoric and taking the heat from under the crisis.
The dispute comes as Iraq, holder of the world's third largest proven oil reserves, is struggling to boost production and exports, and supply from Nigeria has been slashed by almost a quarter by rebel attacks.
There is no sign yet that the lost Nigerian output will resume soon. Royal Dutch Shell
The disruption to Nigerian supply will become more important as the U.S. driving season begins next month because Nigerian crude is easier than some grades to process into gasoline.
Lee of the CGES, a forecaster founded by former Saudi oil minister Sheikh Zaki Yamani, said that while fundamentals such as supply and demand made it difficult to justify an oil price of more than $70, supply worries may push prices up further.
Could we see $80 a barrel? Yes we could as we move toward the summer and fears of supply disruption worsen, he said.
Analysts reckon gasoline stocks in the world's top oil user fell again last week. (
Officials from the Organization of the Petroleum Exporting Countries, source of more than a third of world oil output, say there is nothing more the group can do to bring down prices.
Most members of the 11-country group are pumping oil at the limit, leaving only Saudi Arabia with significant unused capacity to make up for disruptions.
The kingdom holds reserve capacity of 1.3 million barrels a day, less than the 3.82 million bpd that Iran pumped in March, according to the International Energy Agency, an adviser to industrialized countries.
It is obvious that OPEC does not have a magic wand, the oil minister for Qatar, Abdullah al-Attiyah said on Tuesday, the state news agency reported.
(Additional reporting by Neil Chatterjee, Colin Wooster and Gulf newsroom)