OIL edged lower yesterday, but kept within sight of the previous day's all-time high above US$80, as investors stayed locked into the market for the long haul.
Their enthusiasm has grown thanks to a backward-dated market structure, where oil prices nearby are higher than those further forward, which produces favourable returns for investors.
The nearly two-month "backwardation" has been encouraged by the belief by analysts and consumer nations that Opec will not pump enough oil to satisfy demand for fuel this winter.
US crude traded six US cents lower at US$79.85 a barrel by 1125 GMT, after hitting a record of US$80.18 on Wednesday. London Brent crude shed 22 cents to US$77.46.
"Modest demand growth combined with no significant supply increases has 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.
The Organisation of the Petroleum Exporting Countries agreed on a modest supply increase on Tuesday in a bid to soothe consumer concern that soaring oil costs may slow economic growth.
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.
Though quadruple the levels of 2002, the price of oil when adjusted for inflation is below the US$90-a-barrel peaks of the Iranian Revolution in 1979 and the start of the Iran-Iraq War the following year.
"There are so many things that affect the price of oil," Hasan Qabazard, director of Opec's research division, told reporters yesterday.
"We have a storm working its way to American facilities. We have an economic crisis, so many things are affecting...prices."
Hurricane Humberto yesterday hit the Texas coast, a major oil-producing and gasoline-refining area, though industry officials expect little impact on operations.
Reuters
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