Oil prices surged to a new contract high in London yesterday as tightness in the market, and an unexpected leap in demand for heating oil sent the market upwards. International Petroleum Exchange October Brent futures rose 11 cents to US$20.64 per barrel, despite increasing awareness that Iraqi sales would soon begin flowing on to the market, adding to the crude oversupply. It later came off two cents to $20.51, after hitting the technical barrier of $20.65 per barrel and profit taking began to emerge. Nevertheless the October-November spreads widened indicating underlying strength. 'I think the general feeling is that the spot market is relatively tight in the short-term in the United States, and the near-term shortage of supply is also helping,' said Leslie Nicholas of Gerrand and National Intercommodities. Low stock levels were also suddenly becoming apparent in heating oil levels as demand was recorded by the Energy Information Administration, up 12.2 per cent over the past four weeks to 3.17 million barrels per day. Mr Nicholas said the increasing demand appeared to be stemming from the transport industry which was calling on more heating oil in response to a pick up in the economy. He said the trend appeared upwards for heating oil, with some tightening in the market early in the winter months. Crude prices also tend to start spiking up in the third quarter, Mr Nicholas said, but the imminent arrival of Iraqi oil under the oil-for-food deal struck with the United Nations could have a negative impact. November Brent slipped down seven cents to $20, however chartists were reported to be increasingly bullish on crude with some estimates for the fourth quarter seeing the commodity go to $23.30, the year high recorded in April.
