Crude-oil futures climbed to another record level above $80 a barrel Monday, overcoming earlier weakness as traders fretted about near-term risks to global supplies and bet that a Federal Reserve cut in interest rates will help lift energy demand.
"The market is gaining confidence that a Fed rate cut will be a good omen for further energy demand," said Phil Flynn, senior analyst at Alaron Trading.
Federal Open Market Committee policymakers will meet Tuesday. Among Fed watchers, prospects for a rate cut are regarded as a virtual certainty.
Market economists mostly believe the central bank will cut the federal funds rate by a quarter of a percentage point, to 5%. It would be the first U.S. rate cut since June 2003. See The Fed.
On the New York Mercantile Exchange, crude for October delivery tacked on $1.47 to close at $80.57 a barrel, a gain of 1.9%.
The contract had dropped to a low of $78.80 early in the session but then rebounded as high as $80.70 -- a level never before seen on the exchange for a front-month contract.
On Friday, crude oil fell 99 cents at $79.10 a barrel, backing off Thursday's previous record-high close of $80.09. The contract rose as high as $80.36 in electronic trading Friday.
Goldman Sachs said its analysts raised their year-end forecast for oil prices to $85 a barrel for 2007 and pegged the year-end price at $95 a barrel for 2008.
"Near term, they believe the risk of oil breaching $90/bbl is high," according to a research note released Sunday by the brokerage.
Goldman has long envisioned a so-called "super spike" as being in the cards for crude prices.
"The core drivers of our analysts' long-standing super-spike framework remain firmly intact: spare capacity throughout the oil value chain remains limited, supply is struggling to grow, and demand growth continues," the note said.
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