Crude prices set new record close despite production hike

Light, sweet crude for October delivery rose $0.74 cents to 78.23 a barrel on the New York Mercantile Exchange. The former highest- ever settlement price for a front-month contract was $78.21 a barrel, set on July 31.

OPEC’s hike could not meet demand
OPEC, which produces about 40% of the world’s oil, agreed late Tuesday in Vienna to boost its crude output by 500,000 barrels a day, which would take effect on November 1. OPEC officials said the agreement would add oil to current production levels over their current 25.8 million barrels per day quota ceiling. However, the cartel’s move could not ease investors’ worries that the current oil production would not be enough to boost thinning world inventories.

“The fact that OPEC indicated that it would boost oil production by additional 500,000 barrels makes great headlines, but is unlikely to achieve the stated result of meeting demand,” Wall Street Strategies’ senior research analyst Conley Turner told Xinhua.

“Even though the cartel is saying that this production increase that will commence in November, the reality on the ground is that production is already at full throttle,” Turner pointed out. “In fact, many members are already producing beyond their quota so an extra half a million barrels is really not going to have a meaningful impact on satisfying demand especially as winter approaches,” he added.

Growing consumer demand
Oil prices have been risen 27% this year and have tripled since 2002 as investors buy into growing consumer demand, real or potential supply disruptions in producers such as Nigeria and Iran and infrastructure constraints such as a lack of refining capacity. (Read more)