Oil's record close above $100 a barrel shows that oil market fundamentals remain tight and there is a need for more supplies, an official from the International Energy Agency said Wednesday.
"It appears there is a confluence of fundamentals influencing the market," Julius Walker, oil market analyst for the Paris-based energy watchdog of major industrialized nations told Dow Jones Newswires. "Markets are tight, stocks are low and geopolitical factors remain a concern."
The front-month contract for light, sweet crude closed at a nominal record of $100.01 a barrel on the New York Mercantile Exchange Tuesday, just $3.09 off an all-time, inflation-adjusted high set in April 1980.
Tuesday's rally was sparked first by news that an explosion Monday at a Texas refinery had put the 70,000-barrel-a-day facility out of commission for possibly months, followed by statements from Nigeria's Movement for the Emancipation of the Niger Delta promising renewed attacks on oil facilities if the country's government didn't explain whether Henry Okah, said to be the group's leader, had been killed in a military hospital. Nigerian authorities later said he was alive.
The situation in Nigeria "will result in more political tension, and may very well lead to more violence," Walker said, adding, however, that he didn't know of any fresh disruptions to Nigerian oil supplies.
Tuesday's rally appeared to reverse a broader trend toward lower oil prices amid perceptions that a U.S. economic slowdown could cut into oil demand in the months ahead.
That possibility, however, has sparked worries of a possible production cut by the Organization of Petroleum Exporting Countries at its March 5 meeting.
"There is a constant worry," Walker said. "Fundamentals remain very strong" in support of high prices.