Crude Climbs to New Record

West Texas Intermediate crude futures pierced their all-time highs at the New York Mercantile Exchange on strong bullish trading sentiment and broad supply concerns.

The near-term WTI contract climbed $1.36 to $78.19 a barrel. Reformulated gasoline closed 4 cents higher at $2.13 a gallon. Heating oil rose 4 cents to $2.10 a gallon.

September natural gas dropped 28 cents to $6.22 per million British thermal units.

The previous record high for near-month WTI crude was $77.95, reached on July 14, 2006, according to Stephen Schork, principal of The Schork Group.

Over the last month, the futures curves for both WTI and Brent crude have undergone a massive readjustment and are both in backwardation, meaning that closer-month contracts are selling for higher prices than longer-term contracts. Also, the relationship between WTI and Brent has normalized, with WTI now trading at a slight premium over Brent.

"Backwardated markets are the result of strong demand relative to supply as the market makes it unprofitable to hold supplies and as demand calls upon the commodity in question to come out from storage," wrote Dennis Gartman, publisher of The Gartman Letter, in a note.

"This market inarguably has a bullish trend," added Schork. "The switch to backwardation has induced funds to come back into the market. It is attracting long-only commodity index funds, which make money buying the prompt month and then rolling their positions into each new sequential contract."