Oil Prices Hit New Record Above 82 Dollars in Asian Trade

19 September 2007

SINGAPORE (Thomson Financial) - Oil prices topped 82 US dollars on Wednesday, soaring to a fresh record in Asian trade after the Federal Reserve cut interest rates to boost the US economy.

At 10:20 am (0220 GMT), New York's main futures contract, light sweet crude for October delivery, was trading at a new all-time high of 82.32 dollars a barrel, up 81 cents from its close of 81.51 dollars in late US trades Tuesday.

Brent North Sea crude for November delivery was 79 cents higher at 78.38 dollars a barrel.

'We are in a new territory for oil pricing,' said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz.

Tony Nunan, manager for energy risk management at Mitsubishi Corp (Xetra: 857124 - news) in Tokyo, said the 85 dollar mark was now within striking distance.

'Prices have broken through a lot of strong technical resistance already. I assume 85 dollars is a round number that the market is targetting,' he said.

He said the half-point cut in key rates by the US Federal Reserve was aimed at calming fears of a slowdown in the US economy, which has been grappling with a crisis in the subprime housing loan market.

'It's a pretty big boost to the equity markets and it's calming the fears about a slowing economy. It is also providing more fuel to the fire in the oil markets,' Nunan said.

The US rates reduction is expected to cushion the impact on the general economy of a credit crunch sparked by the subprime crisis. The fear is that an economic slump in the United States, the world's biggest energy consumer, will dent demand for oil.

Nunan said concerns over falling US energy (NASDAQ: USEG - news) inventories ahead of the Northern Hemisphere (NHD.V - news) winter season have also helped boost oil prices, highlighting tight supplies amid high demand.

'The key issue will be how much the inventory will continue to fall,' he said.