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Oil touches 34-month high
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November 10, 1999: 7:55 a.m. ET
Brent hits $24.35 a barrel in London as market continues to celebrate supply dip
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LONDON (CNNfn) - Oil prices Wednesday hit their highest level in London since January 1997 as oil traders continued to celebrate evidence that the supply side was tightening in the run-up to the Northern Hemisphere's winter.
The price of benchmark Brent crude for December delivery surged 22 cents to $24.35 per barrel in morning trade -- its highest level in 34 months -- before settling back to trade around $24.18. But traders said oil could well test the $25 level before long if temperatures plummet over the next few months.
"If we get a cold snap we could spike towards $30 and it is sustainable at $25 for a month or two," said Peter Hitchens, oil analyst at Williams de Bröe in London.
Traders said the main driver behind the rally in the oil price, which has already surged $1.30 in the previous two sessions, continued to be the data released Tuesday that show a sharp decline in oil stocks held by the major industrialized nations.
"The fallout is coming through from yesterday's (Tuesday's) data, which was very good. It has given the market a lot of encouragement," Peter Gignoux, manager of the petroleum desk at Salomon Smith Barney in London.
The International Energy Agency, the Paris-based intergovernmental think tank, released figures Tuesday showing that inventories among the major economies fell by 1.8 million barrels a day in September. The study went on to predict a share drawn down in stocks throughout the winter months.
"It's a rapidly tightening market. If we have a normal winter, there is not enough supply being made available in the fourth quarter. The market needs more oil," said David Knapp, director of the IEA's markets division.
These figures were backed up by separate reports from both the United States and Europe. Weekly figures to Nov. 5 released by the American Petroleum Institute showed stocks of heating oil and diesel fell by 4.2 million barrels to stand 11.7 million barrels below last year's levels.
European data for October said stocks of crude and oil products across 16 countries fell by 2.81 million barrels.
The decline in inventories is a result of an agreement by the 11-nation Organization of the Petroleum Exporting Countries last March, which committed to cutting global daily output by 1.7 million barrels per day. "OPEC compliance numbers are good," added Gignoux.
Shares in the major European oil companies were up sharply on the back of the bullish sentiment. In London, BP Amoco jumped 2.3 percent to 609 pence, while rival Shell surged 3.7 percent to 478 pence.
TotalFina in Paris jumped 3 percent to trade at  127.9, while its merger partner Elf Aquitaine added 1.4 percent to 148.9.
-- from staff and wire reports
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