Tags: Oil

Oil Hits New Record High, Breaking $94 a Barrel

By , Money Morning •

By Jason Simpkins
Associate Editor

Crude oil prices skyrocketed $4.15 on the New York Mercantile Exchange to close at $94.53 a barrel Wednesday. Prices rose as high as $94.74 in intraday trade, surpassing crude's all-time record trading high of $93.80 a barrel, set Monday. In after-hours trading it soared as high as $95.28 a barrel.

Oil prices had retreated on Tuesday, dropping more than three dollars a barrel after Goldman Sachs turned negative on crude's short-term outlook. To that point Goldman Sachs had been more bullish on the commodity than any other investment bank on Wall Street.

However, prices were resurrected by a disappointing inventory report and a rate cut from the Federal Reserve. 

In its weekly report, the Energy Information Administration said crude inventories totaled 3.9 million barrels last week, when many analysts had expected an increase. To make matters worse, refiners have scaled back operations and are running at just 86% capacity.

Oil prices have spiked more than 30% in the last month - and quadrupled since 2002. That has some analysts concerned that a recession may be imminent.

David Wyss, chief economist with Standard & Poor's, puts the chance of a recession at just under than 50%. "With housing diving, the problems in the credit market and rising oil prices, eventually one of these things is going to break the camel's back," he told CNNMoney.
"My feeling is $90 doesn't get us there," he went on, "My guess is we have to go over $100 to get to a recession. How much over $100, I'm not sure."

Unfortunately, political and social upheaval in many oil-producing regions (particularly Iraq, Iran, and Nigeria) has posed a continuous threat to supply. Also, the value of the dollar has been hitting historic lows against foreign currencies on a consistent basis. Given the circumstances, $100 oil is a very real possibility.

News and Related Stories: