Oil has risen to within reach of $100 a barrel for the first time since the 2008 price spike amid mounting optimism that global economic growth will boost demand.
But the sharp rise has also heightened concerns about the impact of soaring commodity prices on the global economy, particularly in emerging countries, as it comes on top of high costs for agricultural commodities and metals.
The oil surge also comes on the back of supply disruptions such as this week’s outage in a pipeline in Alaska and strong investor inflows in commodities.
Traders said there was a growing consensus that the Organisation of the Petroleum Exporting Countries was comfortable with prices near at $100 a barrel. In the past, Saudi Arabia, the cartel’s de facto leader, had said it would work to keep oil prices at $70-$80.
Brent crude, the global benchmark, hit an intraday high of $98.8 a barrel on Wednesday, the highest since September 2008, when oil prices were in the midst of a collapse from their $147-a-barrel record.
“Brent can hit $100 any day now. There’s a lot of upward momentum,” Michael Wittner, at Société Générale, said.
The cost of premium quality crude varieties in the physical market, such as Tapis of Indonesia and Bonny Light of Nigeria, surged on Wednesday above $100 a barrel.
The strength in the rebound in oil consumption last year surprised many, with demand growing at a rate of 2.3m barrels a day, the second-highest in three decades. And oil traders and investors have begun the new year in bullish fettle.
“The consensus demand forecast for 2011 is creeping up day after day,” a senior trader said.
The International Energy Agency, the western countries’ oil watchdog, forecast that consumption would grow this year by a slower 1.3m b/d, but analysts and traders believe it would be much higher, with some pointing to 1.7-2.0m b/d.
But analysts cautioned that Brent could be overbought. While it is flirting with $100, West Texas Intermediate, the US benchmark, is languishing.
On Wednesday, WTI was trading more than $6.50 short of Brent prices at $92.39. The widening gap between the two benchmarks is due to a build-up of inventories at Cushing, Oklahoma, the landlocked delivery point for the WTI contract.
As Cushing has few outlets to evacuate surplus oil, a glut tends to depress the price of WTI relative to other US and international benchmarks.