Oil Futures Rally Above $120

Oil Futures Rally Above $120
Latest Nymex High Puts Price Up 27% For the Year to Date
By GREGORY MEYER May 7, 2008; Page C10
Crude-oil futures closed above $120 a barrel for the first time Tuesday as the market showed conviction that record prices won't necessarily trip up global demand.
Light, sweet crude for June delivery settled up $1.87, or 1.6%, at $121.84 a barrel on the New York Mercantile Exchange, after rising as high as $122.73.
The Energy Information Administration on Tuesday projected triple-digit prices for months to come, issuing its latest monthly outlook that forecast crude prices averaging $114 a barrel in the second half of the year. While the agency anticipates U.S. demand will slip by 190,000 barrels a day this year to its lowest annual level since 2003, it expects emerging economies to keep world demand expanding 1.4%, to 86.6 million barrels a day.

Associated Press
A worker of state oil company Pertamina cycled past barrels filled with fuel in Jakarta Tuesday.
"We've had a doubling in crude prices in the past 14 months, and they're still looking at a 1.4% increase in global demand across the year," said Jim Ritterbusch, president of energy-trading advisory service Ritterbusch and Associates in Galena, Ill.
Further agitating buyers, equity analysts at Goldman Sachs issued a report saying prices of $150 to $200 a barrel seem "increasingly likely" six months to two years from now. The same group of analysts made waves three years ago when they identified a "super-spike" lifting prices as high as $105 a barrel, then considered to be an outlandish notion.
Crude oil has risen 27% so far this year and is up 97% from a year ago on a combination of irrepressible global demand growth and supply troubles. The Organization of Petroleum Exporting Countries' oil production slumped 0.5% in April amid problems in member states Nigeria and Iraq, according to a Dow Jones Newswires survey.
Flows from investment funds into commodities have also ignited crude prices as people seek protection from inflation and a weaker dollar. This helps explain why crude-oil prices can remain strong in spite of faltering demand in the U.S., said Sarah Emerson, managing director at Energy Security Analysis Inc. in Wakefield, Mass.
"Oil prices are driven by two different markets," Ms. Emerson said. "I don't think the physical market warrants a price collapse, though it probably warrants a weaker market. But you have this other market, which is a desire to hold crude oil, and that's really in the drivers' seat at the moment."
Crude, which is priced in dollars, has drawn investors seeking a hedge against the greenback's decline. The dollar's weakness has also softened the impact of higher prices for buyers using other currencies.
CORN: Futures rose on weather concerns as rainy weather has left soils in the Midwest soggy and farmers idle. Outside market strength also supported corn. May corn at the Chicago Board of Trade gained 12.75 cents to $5.9475 a bushel.
SOYBEANS: Prices fell after a mostly firmer session, as selling pressure emerged on ideas the Argentine government and farmers would work out their differences and farmers would call off their strike. However, after the markets close, Argentine officials said the farm talks were suspended until Wednesday. May CBOT soybeans dropped 8.50 cents to $12.6450 a bushel.