Oil at record high, touches $50

Oil has grabbed the financial market spotlight this year, surging 55 per cent as rising consumption and the fallout from years of underinvestment in supply infrastructure tempts heavy buying from big-money funds.

Producers are pumping at just about full tilt to feed demand as China’s economic expansion powers the fastest growth in 24 years. Worries about supply security in Saudi Arabia, Iraq and Russia have magnified the price surge. Prices hit new highs after rebels fighting for self determination in Nigeria warned oil companies to shut production in the Niger delta before they declare an all-out-war on October 1.

However, Royal Dutch/Shell and Italy’s Agip said they saw no reason to stop oil operations. Shell has already cut 30,000 to 40,000 bpd due to security curbs.

Oil prices are now near levels hit during the Arab oil embargo of 1973-74, though much lower than the record $80 annual average high following the 1979 Iranian revolution .The big question now is whether prices will push higher still. European Union Energy Commissioner Loyola de Palacio said the pressure on prices would ease after the US presidential elections in November.

The move above $50 prompted Saudi Arabia to announce that it will boost its official production capacity by 500,0000 bpd to 11 million bpd to help ease supply concerns.

OPEC is producing at its fastest rate since the late 1970s in an effort to control prices, but much of the extra crude is not of the quality best suited for transportation fuels. ‘‘At the moment there’s nothing we can do. OPEC has spare capacity, however, whatever we do there is no sensitivity in the market,’’ OPEC President Purnomo Yusgiantoro said. — Reuters