Oil prices smashed records again Thursday, peaking at US$100.09 a barrel after the release of a U.S. crude inventory report.
Light, sweet crude for February delivery closed at $99.18 a barrel on Thursday.
Crude futures edged up after the Energy Department's Energy Information Administration said crude supplies fell by four million barrels last week. The report marked the seventh-straight weekly decline in crude inventories.
The decline in inventory was more than double the 1.7 million-barrel decline analysts surveyed by Dow Jones Newswires, on average, had expected.
However, heating oil supplies and diesel fuel rose by 600,000 barrels, surprising analysts who predicted distillate supplies would fall by the same amount. Analysts were also surprised to see gasoline inventories increase by 1.9 million barrels after predicting only a 1.3 million-barrel rise in supplies.
On Wednesday, crude oil slated for February delivery briefly jumped US$4.02 to US$100 a barrel before dropping back to a record close of US$99.62.
Patricia Mohr, Scotiabank's vice-president of economics, told Canada AM on Thursday that should crude oil futures continue to hover around the benchmark of US$100, Canadians can expect price fluctuations in home heating oil and gasoline.
"It (gas prices) could move up a little bit further as some of the wholesale prices coming out of the refinery really continue to move up with higher crude prices," she said.
"We think that with the US$100 mark you're close to the top on global crude oil prices, but we do think though, in the coming year, that prices are going to stay exceptionally high."
Mohr said because of the volatility Canadians should expect "big swings at the pumps."
Some analysts speculate crude prices could rise even higher than the psychological milestone of US$100 per barrel, BNN's Michael Kane told Canada AM on Thursday.
"We're hearing some commentary that there could actually be US$110 or US$115 dollar oil out there," said Kane. "If that happens, we could see gasoline pump prices go up to $1.40-per-litre range."
Gas prices in Canada increased slightly on Thursday with the national average of regular unleaded fuel rising from 106.329 cents to 107.167 cents according to gasbuddy.com, a website that tracks gas prices across North America.
The average price for gasoline in Newfoundland jumped by more than three cents to 117.363 cents on Thursday, the website reported, while the average price in Toronto rose from 103.726 cents to 106.172 cents. The website reported only slight increases, or none at all, for the rest of the country.
Geopolitical factors
A number of geopolitical factors contributed to Wednesday's historic oil prices, including escalating violence in Africa, a weak U.S. dollar and speculation that global demand for oil will outpace supply.
In Nigeria on Tuesday, two police stations were attacked and a major hotel looted Tuesday as gangs of armed men descended on Port Harcourt, the centre of the country's oil industry. Officials reported at least a dozen deaths have been linked to the attacks.
"We did her this morning that Saudi Aramco, which is the world's largest oil company, is delaying plans for an oil field it wanted to develop. We had some disruption in Nigeria because of political problems, so all of that is putting upward pressure on the price," Kane said Thursday.
Meanwhile, a recent report saying the Organization of the Petroleum Exporting Countries (OPEC) may not meet its share of global oil demand by 2024 also contributed to the rise.
Prices this year are up $25 since late last summer, likely fuelled by tight supplies globally, Mohr said.
"OPEC when it met on Dec. 5 decided not to raise production in the first quarter of this year because they think that the hedge funds speculation and geopolitical supply risks have more to do with very high crude oil prices rather than inadequate supplies," Mohr said.
"So they decided not to lift production, but I think there is actually bigger demand for OPEC crude in the first quarter of this year than supplies, so (there will be) really high prices."
The soaring prices mean oil-producing provinces such as Alberta, Saskatchewan, and Newfoundland will likely experience big profits.
Every increase of US$1 in the price of oil puts an estimated $139 million into Alberta coffers each year. Its forecasted oil price is currently only $80. Saskatchewan forecasts oil at US$72 per barrel, and it could collect as much as $25 million dollars extra for each dollar above that rate and it could collect as much as $25 million dollars extra for each dollar above that rate.
With files from The Associated Press
