Crude oil futures prices soared more than $2 a barrel to settle above $48 on Friday, as concerns about tight winter fuel supplies mixed with speculation that OPEC may scale back output later this year.
Light, sweet crude for December delivery rose $2.22 to $48.44 per barrel on the New York Mercantile Exchange (search). In London, Brent crude gained $2.17 to $44.89 per barrel on the International Petroleum Exchange.
Nymex crude futures are nearly $7 cheaper than the peak closing price of $55.17 set twice in late October. Oil prices would have to surpass $90 per barrel to meet the inflation-adjusted peak set in 1980.
Rising oil inventories in the United States have helped push down prices by 12 percent since late October despite stubbornly low quantities of distillate fuel, which includes heating oil, diesel and jet fuel.
But traders are beginning to worry that the Organization of Petroleum Exporting Countries (search), fearful of oversupplying the market, might consider trimming production at its next meeting in December.
"OPEC could pull back a bit from the all-out production that we're seeing right now," said John Kilduff, senior analyst at Fimat USA Inc. in New York.
Representatives for Iran and Venezuela have suggested such a cut may be necessary to prevent prices from plummeting.
Societe Generale Paris-based economist Deborah White said OPEC production cuts "are both imminent and inevitable, and the market will be feeling their effects by January, if not earlier."
"Let us hope," she added, "that OPEC does not cut too deeply, because that would mean losing a valuable opportunity to let this over-heated market cool down."
Robert W. Baird oil analyst George Gaspar said there is currently no "glut" of oil on the market, in spite of what bullish energy traders might say. Gaspar added that OPEC may not need to pump as much oil beginning early next year if world demand growth slows as expected.
"It's too soon to make that assessment," Gaspar said. "After all, they have consistently said that oil prices are too high."
The more immediate concern, Gaspar said, is the tight supply of heating oil.
Indeed, heating oil futures climbed for the third straight day on Friday, rising 5.26 cents to $1.4826 per gallon, as traders continued to fret supply data released Wednesday by the Energy Department (search). The agency reported that the nation's supply of distillate fuel had fallen for the ninth consecutive week, leaving inventories at 114.6 million barrels, or 14 percent below year ago levels.
With supplies tight and prices high, the Energy Department has warned homeowners that use heating oil to expect to pay 37 percent more for fuel this winter. Natural gas customers should expect to say 15 percent more to heat their homes, the agency said.
The report of a refinery outage in Venezuela served as a further catalyst for the market on Friday, sending gasoline futures up 7.26 cents to $1.3109 per gallon.
Dow Jones reported Friday that the Curacao Isla refinery, owned by Venezuela's state oil company Petroleos de Venezuela, shut down completely Thursday morning due to a power failure and still remains inactive.
Also on Friday, Russia moved ahead Friday with plans to break up OAO Yukos, announcing it would auction off a majority stake in its main production unit. The bidding in the Dec. 19 auction will start at $8.6 billion — lower than even the most conservative independent valuation.
While still palpable, the pre-winter oil supply fears that dominated the market in September and October have dissipated in recent weeks thanks to high levels of imports and rising production in the Gulf of Mexico, where output had been hobbled for weeks following Hurricane Ivan (search).
As of Thursday, more than 30 million barrels of oil production had been lost in the Gulf of Mexico since mid-September, and daily output in the region is still 12 percent below normal.
Markets have been on the edge all year over its limited excess production capacity and strong demand, primarily from growth in China.
In other Nymex trading, natural gas futures climbed 14.7 cents to $7.02 per 1,000 cubic feet on Friday.