Light, sweet crude for October delivery slipped marginally by 26 cents to US$79.65 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore. In London, October Brent crude dipped to US$77.62 a barrel on the ICE futures exchange.
US Energy Department's Energy Information Administration report indicated that crude oil supplies fell 7.1 million barrels in the week ended Sept. 7, more than twice the average 2.7 million-barrel decline - this unexpectedly large plunge in US crude inventory levels drove oil futures to US$80 a barrel.
Oil prices dipped below US$80 per barrel as traders took profit after the huge jump in prices. The contract mounted to US$$80.18 a barrel on Wednesday before settling at a record close of US$79.91 a barrel. Despite this quantum jump in prices, oil remains well below inflation-adjusted highs of early 1980. Depending on the adjustment, a US$38 barrel of oil in 1980 would be worth almost US$101 today.
Despite a fall in inventory levels, supplies are not reported to be unusually low - and continue to remain within the average range for this time of the year. The current uptrend in oil prices has been largely due to speculative buying by big investment funds, which are responding to a price structure in which oil contracts for delivery in future months are cheaper than the current front-month contract. That kind of structure signifies tight demand in the immediate future and is a buying incentive. Investors who buy now will end up with more oil contracts later, when October futures roll over to cheaper contracts for delivery in later months.