International Oil Prices Soar over $40 Again

International oil price surged, passing the $40 mark again in just five weeks.

According to the Korea National Oil Corporation (KNOC) on July 9, the spot price of West Texas Intermediate (WTI) stood at $40.27 per barrel as of July 8, rising by $1.08 from the day before, and passing the $40 “psychological barrier” in just 38 days since June 1 ($42.36).

The WTI futures price for the August delivery rose by $1.25 to $40.33 per barrel, rising to the $40 mark for the first time since June 3 ($40.85).

The spot price for Dubai crude was up $0.14 to $34.61, and Brent crude inched up 48 cents, standing at $37.25 per barrel.

The cause for the increase in oil prices is analyzed as a possibility that the U.S.’ increment for crude inventories did not meet the expectations, and that concerns for a setback in the production for the Russian oil company, Yukos, have increased.

The U.S. Energy Information Administration (EIA) announced on July 8 that U.S. oil inventory was 350 million barrels, an increase of 100,000 barrels from just the week before. This increment reached only 6.6 percent of what the oil market experts were expecting (1.5 million barrels).

The possible insolvency of Yukos, which produces 20 percent of the entire Russian oil supply, has also agitated the oil price increase.

In addition, the analysis that the inflow of speculative funds such as hedge funds to the international oil market and growing concerns for a terror attack to the U.S. mainland also affected the price increase.

KNOC’s Information and Research Department Director Gu Ja-gyon said, “Recently, international oil prices are showing an upward trend, but this is not due to a change in the supply and demand. The prices may rise for the meanwhile, but this increase will probably not last long-term.”

Ki-Jeong Ko koh@donga.com