China (Platts) -- May 19-23, 2008

By reporters at Platts, the energy information division of the McGraw-Hill Companies. For more information about Platts' information products in China, contact Platts at china@platts.com, or call its representative office in Guangzhou at (+86) 20 2881 6588.

The oil markets continued their surreal-looking rally last week, surging higher by another 5% or more as the price rally failed once again to force a major response from either consumers or producers of oil.

The fact that oil supply and demand seem to be locked into well-worn patterns seems to have made the price of oil itself almost irrelevant -- and it has given the market a free pass to surge even higher, for now.

With such high prices, and movements of 2% or 3% fairly normal, it was not unusual to see swings of $3, $4 or even $5 in day to day value.

Those sorts of outright price movements would have generated shocks of their own only a decade ago.

Now they are commonplace.

Reported US crude stocks dropped a precipitous 5.4 million barrels to 320.442 million barrels last week, sending global futures markets racing to record levels.

"We are going through very difficult times: difficult to understand, difficult to interpret," Fatih Birol, chief economist for the International Energy Agency, told Platts last week by telephone from the IEA's Paris headquarters.

"I am really concerned about the oil markets and one should really be very naive if one is not concerned nowadays about the oil market, even if he or she is a producer or a consumer, or a public policy maker like me, or a private company person."

The price of July crude oil futures closed on the New York Mercantile Exchange at $132.19 per barrel, up 4.7% for the week and a gain of 33% since January. ICE Brent closed the week in London at $131.57, up 5.3% for the week and almost 35% higher than in January.

Of the refined oil products, ICE gasoil futures in Europe remain the most spectacular derivatives contract in the world -- in terms of price movement.

Last week gasoil futures rallied a mind-blowing 6.7% in one week to close Friday at $1,282.75 per tonne.

The International Energy Agency has started a "substantial analysis" of global oil supply which is likely to result in revisions to projections contained in its annual World Energy Outlook to be published in November, Birol.

The Outlook will lay out supply and demand scenarios for the next two decades. Birol said it was too early to say what the numbers might be because the work was ongoing.

Updated: May 27, 2008