Oil prices held steady near $47 on Wednesday, a day after striking another record peak as U.S. inflation stayed in check despite scorching energy costs and ahead of weekly data expected to show a drop in crude stocks. U.S. light crude oil for September rose as much as 93 cents to $46.95 a barrel on Tuesday, the highest in the 21-year history of the New York Mercantile Exchange contract. It was up 2 cents at $46.77 on Wednesday. U.S. prices had set all-time highs in all but one of the previous 12 trading sessions, and remained about $9 a barrel, or 25 percent, higher than at the end of June. In London, North Sea Brent shed 18 cents to $42.81 a barrel on Wednesday. It settled on Tuesday at $43.05, up 36 cents, and reversing a sell-off sparked by Venezuelan President Hugo Chavez's referendum win. The market rose after the United States reported consumer prices fell in July for the first time in eight months, indicating underlying inflation pressures were largely under control despite emerging signs globally that rising energy costs were starting to bite.
"The economy overall is unaffected by oil prices at this high level. That suggests retail oil demand will continue to be healthy," said Tony Nunan, manager at Mitsubishi Corp.'s international petroleum business, referring to U.S. demand. Recent data also showed fresh evidence of strong Chinese demand. U.S. oil demand so far this year is running at a strong growth rate of 3.5 percent, despite high prices. In real terms, adjusted for inflation, current oil prices are well below 1980's peak of $80 a barrel, after the Iranian revolution. But average U.S. prices this year of $38 are approaching those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
ECONOMIC MEASURES
Yet, some Asian countries are increasingly worried about the soaring prices and are planning measures to conserve energy, or to cushion its impact. Thailand is drafting plans to make motorists pay to use main Bangkok streets and encourage shops and cinemas to close earlier, while South Korea may consider cutting oil tax rates at the end of August, in a bid to shield the economy from red-hot oil prices. Traders were awaiting the U.S. Energy Information Administration's inventory data for the week ended Aug. 13, due at 1430 GMT on Wednesday. A survey forecast a fall of 1 million barrels in commercial U.S. crude stocks. In the previous week, crude stocks fell 1.9 million barrels to 298.6 million. Despite assurances from OPEC kingpin Saudi Arabia this week that it was pumping as much as possible to lower prices to $25 to $30 a barrel, analysts feared global capacity was reaching its limit. "And significant capacity is seen as unreliable -- Iraq, Russia and Venezuela for instance. Ongoing violence in Iraq is reinforcing the mood," David Thurtell, commodities strategies at Commonwealth Bank of Australia, said in a report.
Iraq's oil exports remained at half their normal flows on Tuesday as a Shi'ite uprising kept a main pipeline feeding southern terminals shut, an official in the South Oil Company said. Insurgents had set fire to an oil well in southern Iraq on Monday. On Tuesday, Venezuela again said it would propose at an OPEC meeting next month to raise its preferred oil price band to $28 to $35 a barrel from $22 to $28 to mirror the high crude values. "(Oil) price has risen again (after coming down on Monday's Venezuelan referendum result), but that is not because of Venezuelan or OPEC policies," Venezuela's OPEC governor, Ivan Orellana said, adding that the U.S.-led war on terror had "introduced in the market instability and volatility in the price of oil".////www..com