Oil hits new record over $90
Crude surges more than $3 after report suggests OPEC isn't likely to boost production and Middle East violence flares.
NEW YORK (CNNMoney.com) -- Oil prices hit a record high Thursday of more than $90 a barrel after reports indicated that the Organization of Petroleum Exporting Countries has no plans to increase production.
U.S. crude for December delivery jumped $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange, surpassing the previous settlement high of $89.47 a barrel set Oct. 19. Oil also hit a new trading peak of $90.60, breaking the previous record of 90.07, also set Oct. 19.
Oil had been higher throughout the day, but spiked late afternoon after comments from an OPEC official.
"We have no price band or price target," OPEC Secretary-General Abdalla Salem El-Badri said Thursday on the sidelines of a meeting with Chinese energy officials, according to an online report from the Wall Street Journal. "If it persists for a longer period, then we start worrying. But at this time we don't know what's going to happen next month."
El-Badri also said the cartel isn't having any discussions about increasing production, the Journal reported.
OPEC, which supplies about 40 percent of the world's 84 million-barrel-a-day oil habit, agreed to boost production by 500,000 barrels in September, but the move did little to calm oil prices.
There had been speculation that the cartel would again boost production at its next meeting in December.
One trader downplayed the notion that OPEC would increase production.
"No one has any more to give us," said Nauman Barakat, a trader at Macquarie Futures, the trading arm of Macquarie investment bank.
While Saudi Arabia is generally believed to have the ability to pump about 2 million more barrels a day - the world's only significant remaining spare production capacity - Barakat said they are keeping that in reserve in case of a real supply disruption.
Turkish attacks on Kurdish separatists in northern Iraq and reports of Lebanon firing on Israeli warplanes also pushed prices higher, as traders feared conflicts could spread to the broader Middle East.
In addition, Barakat believes that today's news revealing signs of a weak economy - including a fall in durable goods and slow housing sales - makes it nearly certain the Federal Reserve will cut interest rates next week, pushing the dollar lower and commodity prices higher.
"I think $90 is a rest stop," said Barakat, who added that traders have placed more bets that oil will hit $100 than they had on $90.
The good news for drivers is that the record crude prices so far haven't appeared to influence gasoline prices.
While crude has surged nearly 30 percent in the last month, the retail cost of gasoline has barely moved, going from a national average of $2.81 a gallon in September to $2.82 this month, according to the motorist organization AAA.
Experts say weak demand is to blame, as the summer driving season is over and it appears Americans are beginning to drive less anyway with gasoline near $3 a gallon.
Crude oil prices have more than quadrupled since 2002. Analysts say surging global demand combined with limited new supply is the main underlying factor.
The surge in prices has also attracted lots of speculative investment money, further driving prices higher. And the tight supply and demand situation magnifies the effect that geopolitical tensions have on prices, as there is less spare supply available globally to cover a disruption from places like Iran, Nigeria or Venezuela.
The falling U.S. dollar has also played a role, as oil worldwide is priced in dollars.
Oil producing nations have less incentive to ramp up output if the buying power they receive per barrel is declining, and foreign consumers have less incentive to reduce demand if oil is, relatively, getting cheaper for them.