Shanghai fuel oil futures yesterday shot to an all-time high since trading began in 2004, following the surge of international crude oil price that hit a record high of $122 per barrel on Tuesday.

The most actively traded fuel oil futures contract for delivery in July soared 1.1 percent on the Shanghai Futures Exchange (SHFE) to 4,644 yuan per ton, a new record, in the morning session, after falling slightly to end at 4,616 yuan. The transaction volume totaled 85,524 hands, up 12.9 percent from the previous trading day.

The Singapore benchmark 180CST fuel oil yesterday also rose 2.18 percent to close at $589.3 per ton, a record high since trading began there in 2004 as well.

On the New York Mercantile Exchange, the most actively traded crude oil futures contract for delivery in June increased 0.14 percent to $121.57 per barrel in yesterday's electronic trading. The contract has climbed an aggregate 6.2 percent from a week ago.

"The price surge of crude oil in the international markets was largely driven by the forecast of rising demand from the emerging markets and unchanged supply by the producing countries," said Lin Hui, an analyst at Orient Securities Futures Co in Shanghai.

Latest figures from US Energy Information Administration (EIA) estimate that world oil consumption is projected to grow by 1.2 million barrels per day in 2008, although US consumption of liquid fuels and other petroleum is expected to decline this year by about 190,000 barrels per day as a result of the economic slowdown and high petroleum prices.

"OPEC appears satisfied with current market conditions, given recent statements by some members suggesting that there are no plans to review OPEC production until the next scheduled meeting on Sept 9," said a short-term energy outlook by EIA on Tuesday.

Analysts said the flow of investment into commodities markets plus ongoing geopolitical concerns in such producer countries as Nigeria, Iraq and Venezuela have contributed to crude price volatility.

In addition, analysts expect the steady weakening of the US dollar to exacerbate the price surge of crude oil and other commodities, including metals.

Some analysts fear the worldwide price spike of crude oil and refined oil products would, to some extent, constrain global consumption and add pressure to further price increase.

"With the price continuing to surge, there is limited space for further consumption increase in the second half of 2008," said Lin.

(China Daily May 8, 2008)