Oil now over $144

After U.S. inventories reported a shock 2 million barrel draw, the price of oil rose above $144 to a new record.

Crude oil futures rose to a record above $144 a barrel in New York after a U.S. government report showed an unexpected decline in inventories.

Supplies dropped 1.98 million barrels to 299.8 million last week, the lowest since January, the Energy Department said. Analysts in a Bloomberg News survey had predicted the report would show a 500,000 barrel rise in inventories. Prices also climbed as the dollar weakened.

“We dropped about 2 million barrels on crude and most everyone was looking for a slight build,” said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. “That leaves us somewhere around 7 to 8 percent below normal on crude stocks.”

-Bloomberg News, 2 Jul 2008

I do think that we are seeing a euphoric top here. Nevertheless, because supply and demand is relatively tight, crude prices will rise until we see a demand shock. This will mean recession in the developed economy at a minimum and a lot more writedowns for the global financial system.