Oil touches $60 a barrel

[notiCIas]

Oil touches $60 a barrel

Crude rallies after inventory report shows that ballooning energy costs haven't curbed demand.

June 23, 2005: 1:54 PM EDT

LONDON (Reuters) - Oil prices hit $60 a barrel Thursday, rallying on U.S. reports showing that ballooning energy costs have yet to dent demand.

Analysts said oil was probably headed above $60 sometime soon but noted there also could be profit-taking on the way.

Light sweet crude for August briefly touched $60 a barrel, a new front-month contract record, on the New York Mercantile Exchange, before easing a bit and trading at $59.75, up $1.66.

At $60 a barrel, the August contract broke the old intraday trading record set Tuesday at $59.70 a barrel, the highest since futures trading began in 1983.

The highest closing price for a front-month contract was $59.37 a barrel, hit last Friday.

Thursday's gains reversed a two-day retreat from Tuesday's highs.

"The first attack on $60 failed, but I'm convinced that we will see $60 in the next days," said Tobias Merath of Credit Suisse.

On Wednesday, U.S. crude futures fell by 95 cents after a U.S. weekly inventory report showed supplies of some energy products rose.

But the report also showed U.S. demand held strong, especially for distillates, which include heating oil and diesel.

Distillate demand is 6.9 percent higher than a year ago, adding to concerns refiners will struggle to build stockpiles ahead of peak demand in the fourth quarter.

U.S. heating oil futures led the oil rally Thursday, adding 3.94 cents to $1.6620 a gallon.

"What's really driving the market are longer-term concerns," said Helen Henton, head of commodities research at Standard Chartered. "Refinery capacity issues are enough to keep the price high, although maybe not to put it above $60 for long."

As refiners worked at near full-throttle to try to meet demand, overall crude inventories eased further from six-year highs touched last month, but were still 8 percent higher than a year ago, the U.S. data showed.

Signs that consumption in the United States is holding firm have encouraged many investors to keep betting on gains, though analysts say investment flows are becoming more cautious as the world tries to gauge the impact of record high prices.

Oil prices have soared some 35 percent since the start of the year, averaging about $10 more than in 2004.

The Organization of the Petroleum Exporting Countries is pumping virtually flat out, but has said repeatedly that it cannot solve the problem of a global lack of refining capacity.