Oil Rises to a Record After Pickens Says Prices May Reach $150 http://www.bloomberg.com/apps/news?pid=20601087&sid=ax1mtR7O7NQo&refer=home By Mark Shenk
May 20 (Bloomberg) -- Crude oil rose above $129 a barrel in New York for the first time after billionaire hedge-fund manager Boone Pickens said oil will reach $150 a barrel this year because supply isn't keeping up with demand.
Producers are "running out of oil," Pickens, the founder and chairman of Dallas-based BP Capital LLC, said on CNBC today, reiterating comments he made to Bloomberg News on April 29. Goldman Sachs Group Inc. and Deutsche Bank AG also said in the past month that prices would rise.
"It's not just Boone Pickens; just about every big global bank has raised its price forecast in recent weeks," said John Kilduff, vice president of risk management at MF Global Ltd. in New York. "When prices last fell below $20 in 2001 there was a surplus. That's no longer the case. There's now a deficit."
Crude oil for June delivery rose $2.02, or 1.6 percent, to settle at a record $129.07 a barrel at 2:56 p.m. on the New York Mercantile Exchange after reaching an all-time high of $129.60. Prices have doubled from a year ago. A strengthening of the euro against the dollar added to the gains.
The June contract expired today. The more-active July futures contract rose $2.26, or 1.8 percent, to settle at $128.98 a barrel. Contracts for delivery in 2011 and 2012 rose more than 4 percent, a signal that investors don't expect prices to drop. The contract for December 2016 climbed $9.52, or 7.3 percent, to $139.50 a barrel.
Oil advanced above $127 for the first time on May 16 when Goldman Sachs boosted its estimate for the second-half of the year to $141 a barrel, from $107, citing supply constraints. Credit Suisse Group AG and Societe Generale SA raised their oil price forecasts for 2008 and 2009 today, citing investor flows and limited supply.
The weakening dollar prompted the purchase of commodities as a hedge against the currency's decline. The European Central Bank may keep rates at a six-year high to curb inflation.
German Prices
German consumer prices rose 2.6 percent in April from a year earlier after jumping 3.3 percent the previous month, the most in 12 years, according to the Federal Statistics Office in Wiesbaden.
The dollar has declined since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB left rates unchanged. The dollar fell 1 percent to $1.5664 per euro at 3:37 p.m. in New York.
"Oil is up because the dollar is being pounded on the bigger-than-expected increase in German inflation," said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. "The likelihood that the ECB will cut rates to be more in line with those in the U.S. is reduced by the German inflation numbers."
Winners and Losers
The Organization of Petroleum Exporting Countries' oil- export revenue will be over $1 trillion this year, the U.S. Energy Information Administration said on May 6. The estimate is $80 billion, or 8.2 percent, more than the agency forecast in a report published in April.
Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, the largest U.S. energy companies, gained along with the price of oil. Exxon added 20 cents to $94.56. Chevron added 89 cents to $103.09 and ConocoPhillips rose 85 cents to $93.55.
The price of jet fuel, the largest expense at many airlines, has climbed 87 percent in the past year and traded at a record $3.9475 a gallon in New York Harbor today. Air carriers fell, with the Bloomberg U.S. Airlines Index sliding 3.2 percent. All 14 stocks in the index declined.
Earlier Loss
Pickens's BP Capital Energy Equity Fund fell 14 percent in the first two months of the year amid soaring prices for natural gas and crude oil. He told CNBC on Feb. 21 that he was short on both oil and natural gas. A short is a bet that prices will fall.
"Pickens is well respected in the industry, even though he made the mistake of shorting oil in February," said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky.
Brent crude oil for July settlement rose $2.78 or 2.2 percent, to settle at a record $127.84 a barrel on London's ICE Futures Europe exchange after reaching an all-time high of $128.07 today.
The May 15 earthquake in China, the most powerful temblor to strike the country in 58 years, damaged power infrastructure and hampered coal transportation in the southwest. China has dispatched 33,000 kilowatts of diesel generators to help boost electricity supply to the quake-hit areas, the country's industry regulator said yesterday.
Coal Shortage
"There a coal shortage in China because of the earthquake, which is increasing the call on diesel," Kilduff said. "That's why heating oil and gasoil were the first markets to move higher today."
Heating oil for June delivery climbed 9.99 cents, or 2.7 percent, to settle at a record $3.775 a gallon in New York, after reaching $3.792 a gallon, the highest since trading began in 1978. Some traders use heating-oil futures to hedge purchases of diesel and jet-fuel, which are chemically similar.
President George W. Bush prefers to prevent Iran from obtaining a nuclear weapon through ``peaceful diplomatic means," White House spokeswoman Dana Perino said today, dismissing a report by Israel's Army Radio that said Bush intends to attack Iran in the months ahead.
"Worries about Middle East supply have increased because of Israeli reports about U.S.-Iran policy," said Bill O'Grady, director of fundamental futures research at Wachovia Securities in St. Louis. "Outside of a war it's difficult to see how these price gains can continue because at some point the economy will implode."
Iran has the second-biggest proved oil reserves and is the second-biggest producer in OPEC. Almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.
