( Reuter )- OPEC's decision not to pump more oil when prices are at record peaks almost daily could leave the oil market vulnerable to further price spikes.
U.S. oil hit a new record of $105.97 a barrel on Thursday, a day after members of the Organization of the Petroleum Exporting Countries (OPEC) left their output policy unchanged, ignoring demands from consumers led by the United States for more oil.
OPEC's decision, although widely anticipated, came on a day U.S government data showed crude stocks unexpectedly fell last week in the world's biggest oil consumer, after rising for several weeks in a row.
"Prices rallied in the last few weeks while U.S. inventories built. So what happens to prices when broader crude oil fundamentals actually tighten up a bit? We think there is further upside price risk from that angle," said UBS economist Jan Stuart.
Investment bank Barclays Capital last month sharply raised its forecast for U.S. crude oil in 2015 to $137 a barrel from $ 93, and analysts say more such upgrades could be on their way.
"We are going to see prices remain above $100 for a while," said Michael Wittner, analyst at Societe Generale.
The price of oil has averaged more than $96 so far this year compared with $72.30 last year, despite the threat of recession in top consumer the United States that could hurt the world economy and demand for oil.
Washington had called for a modest OPEC output increase of 300,000 barrels per day to 500,000 bpd, which it said could calm prices and help to limit any economic damage.
And according to the International Energy Agency (IEA), which advises industrialized countries on energy policy, prices would have eased had OPEC decided to raise production.
"I think it's basic economics, if you increase the amount of supply that is available, prices fall ... It would have had an impact," said Lawrence Eagles, head of the IEA's Oil Industry and Markets division.
"We are seeing the market signaling a desire for more flexibility," he added.
OPEC has sought to dismiss much of oil's recent rally as driven by speculation.
The sharp fall in the U.S. dollar, jitters in credit and equity markets and rising inflation worries have all driven funds into oil and other commodities, pushing them higher.
There is some evidence of rising investor flows, but some analysts argue that fundamental factors are the main drivers.
"The market is signaling that the concerns are not near-term but longer term concerns: 80-90 percent of the recent price rally is due to an increase in long-dated oil prices," said Giovanni Serio, oil analyst at Goldman Sachs.
"OPEC can do very little to affect long-dated oil prices which are, instead, correlated with cost inflation."
Goldman Sachs recently pointed to cost inflation in the oil industry, measured by oil rig day-rates or the United States producer price index (PPI) for oil and gas field machinery and equipment.
The sharp rise in long-dated crude oil futures prices signals concerns over long-lasting structural supply constraints in the oil market.
U.S. crude futures contracts for 2015-2016, for example, rose above $100 on Thursday. ID:nL06899212
Despite fears about the U.S. economy, oil demand continues to be in place, helped by growth in emerging markets such as China, India and the Middle East.
"The fundamental of strong demand and struggling supply underpin commodity prices and then on top of that you do have a layer of speculators and financial investors," said Stephen Thornber, energy research head at Threadneedle Asset Management.
OPEC's decision not to change output policy has been interpreted by some as a sign that it is not as uncomfortable with rising prices, as it is when prices fall.
"I think OPEC has given a signal that $100 oil does not warrant an increase. They are telling us that just because oil has touched $100, we are not going to raise output," said Francisco Blanch, commodity research head at Merrill Lynch.