KEY POINTS:
Crude oil rose above US$81 a barrel for the first time in New York on speculation rising global demand may hamper efforts to store fuel for the fourth quarter.
A US Energy Department report this week will probably show oil stockpiles in the world's biggest consumer fell for the 10th time in 11 weeks, according to a survey of analysts.
"The market just thinks that there is not a whole lot of crude to go around and they're not willing to give up crude at cheap prices," said Tom Hartmann, commodity broker at Altavest Worldwide Trading in Mission Viejo, California.
"From a technical standpoint, this market probably has the legs to get up to US$83-US$84."
Crude oil for October delivery rose as much as US61c, or 0.8 per cent, to US$81.18 a barrel, and was trading at US$81.04 in after-hours electronic trading on the New York Mercantile Exchange.
The contract rose US$1.47, or 1.9 per cent, to US$80.57 on Monday, the highest closing price since trading began in 1983.
US oil stockpiles probably fell 2 million barrels last week, based on the median estimate from a Bloomberg News survey of 12 analysts. Inventories held 322.6 million barrels on September 7, 2.7 per cent less than a year earlier, and 8.3 per cent more than the five-year average for the period, the Energy Department said.
Another "big draw in the stocks" would probably have a more substantial impact on prices than the Fed decision, Hartmann said.
An interest rate cut would provide reassurance about the economy and ease fears about a pullback in demand, said Rick Mueller, an analyst with Energy Security Analysis in Massachusetts.
"This comes on top of the realisation that Opec's production increase isn't that large and the barrels won't be hitting the US for months anyway."
Opec last week said it would release an additional 500,000 barrels of oil a day into the market beginning November 1 to help meet demand. Opec produces about 40 per cent of the world's oil.
Opec's announcement of the production increase was "too little too late," to prevent prices from rising above US$90 this year, Goldman Sachs analysts, led by Jeffrey Currie, said in a research note. The investment bank raised its year-end oil-price forecast to US$85 a barrel from the US$72 it predicted previously.
Oil gained 9.5 per cent this month as hurricanes threatened oil output in the Gulf of Mexico and US stockpiles fell more than forecast.
September accounts for about a third of the storms and hurricanes reported in the North Atlantic annually, according to US National Hurricane Centre data.
Weather systems over the Bahamas and near Florida's northeast coast may combine in coming days, the centre said in an advisory on its website. "Slow development is possible over Florida or the eastern Gulf of Mexico in a couple of days as these systems interact."
Oil prices have doubled the past three years without any impact on global demand, Hartmann said.
- Bloomberg
