Crude Oil Prices Hit New High

oil derrick in Firestone, Colo.
Crude oil prices surged past an unprecedented $55 per barrel Monday as uncertainty swirled over production, high demand and tight global supplies ahead of the Northern Hemisphere winter.

Crude for November delivery on the New York Mercantile Exchange hit $55.33 per barrel around noon in Asia, up 40 cents from its Friday settlement price. The November contract expires Wednesday.

Heating oil also hit a new peak Monday while Brent crude for December delivery opened at an all-time high, hitting $50.40 on London's International Petroleum Exchange.

The crude oil prices are the highest in a generation and while oil is around 80 percent higher than a year ago, they are still around $25 below the peak inflation-adjted price reached in 1981.

Crude prices have skyrocketed more than $10 in the past month, primarily over production delays in the Gulf of Mexico, where Hurricane Ivan hit mid-September.

Now that the $55 barrier has been surpassed, analysts are looking toward $60 a barrel, with some saying it may reach that mark by the end of the year - smack in the middle of the Northern Hemisphere winter.

"We hit the new milestone and we're looking at $60," said Victor Shum, oil analyst at Texas-headquartered energy consultants Purvin & Gertz. "$60 is certainly feasible."

Declines in U.S. distillate stocks jt before the Northern Hemisphere winter are the latest in a line of supply factors to rattle the market.

The U.S. Energy Department said in its weekly petroleum supply report last week that commercially available supplies of heating oil declined by 1.2 million barrels for the week ending Oct. 8, falling to 50.0 million barrels, or 10 percent below year-ago levels.

Diesel and kerosene are ed for heating oil. Demand for jet fuel - kerosene with additives - also rises in the winter as flights increase during the Christmas season.

Heating oil hit a record $1.5555 per gallon Monday on the Nymex.

In the Gulf of Mexico, over 20 million barrels of crude remain shut in as recovery efforts continue to get production levels back to normal, the U.S. federal Minerals Management Service said on its Web site.

But with the amount of excess capacity - immediate surpl supply - at about 1 percent of daily demand, now estimated to be above 82 million barrels, any supply outage is expected to factor into prices.

Market players have been fixated on potential disruptions in production, such as the jt-concluded oil workers' strike and threats of rebel attacks in Nigeria, Africa's largest producer, and sporadic attacks by militants on Iraqi pipelines.

Unrest in the world's largest producer, Saudi Arabia; the tax battle between the Rsian government and oil giant Yukos; and political tensions in key producer Venezuela have also weighed in recently.

In other developments, Chicago Board of Trade Chief Executive Bernard Dan told Atralia's Nine Network that the U.S. economy would be hurt by the spike - but not significantly. He said the economy could even withstand prices of $75 per barrel.

"I think basically most ers and most traders have priced in that sort of range ($60 to $75)," said Dan. "While it might do some damage in terms of the economy and might be reflected in our equity market, I don't think it is going to be at a level where it is catastrophic in any sense."

His comments came after U.S. Federal Reserve Chairman Alan Greenspan said Friday rising oil prices would have far less impact than the oil shocks of the 1970s.