Singapore: Oil briefly rose above $99 a barrel for the first time Wednesday as the greenback’s fall drove demand for dollar-denominated crude, dealers said.
The jump during early Asian trading hours pushed the price within striking distance of the psychologically crucial 100-dollar level. Dealers said tight global supplies were also helping fuel the spike.
New York’s main contract, light sweet crude for January delivery, pulled back from a new intraday high of $99.29 but was still 94 cents up at 98.97 from a record finish of 98.03 on Tuesday.
Brent North Sea crude for January delivery rose 87 cents to $96.36. It had closed at a new high of 95.49.
“It’s on the upswing again,” said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz. “I think the market is poised to make another run towards 100 dollars.”
The dollar has slumped to a new low against the euro and remained weak against other currencies, making commodities like oil which are priced in the greenback attractive to investors.
The European single currency shot to a new high above $1.48 Tuesday, its highest level since the euro’s creation in 1999.
“The US dollar fell to fresh record lows against the euro on concerns of protracted weakness in the US housing market,” said a Commonwealth Bank of Australia analysts note.
“The oil price benefitted from the weakness in the US dollar.”
Dealers said the stage was set for the market to have a crack at the 100-dollar mark, with the dollar limping against the other currencies and energy supplies remaining tight globally.
“Supply is not growing as fast as demand growth, so the oil fundamentals are tight,” said Shum.
Heating fuel demand is expected to pick up as the northern hemisphere winter period kicks in next month, while energy appetite from the emerging markets such as China and India shows no sign of slowing, dealers said.
Despite pressure from the United States, the Organisation of the Petroleum Exporting Countries (Opec) opted not to raise its production following a rare meeting in Riyadh.
Opec has said it would hold off any discussion regarding production until its next meeting in December.
Opec, which pumps 40% of global crude supplies, last decided to raise output in September when the oil producers’ cartel agreed to provide an extra 500,000 barrels a day to the market, effective from 1 November.
Some traders believe the ongoing weakness in the dollar will prompt Opec to seek higher prices for oil, if not to move away from the currency all together.