BackOil nears $90 as dollar sinks, funds buy
Oil nears $90 as dollar sinks, funds buy
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Singapore: Oil held firm within sight of its new $90 high on 19 October as another slump in the US dollar to a record low and rising fears over pre-winter fuel stocks lent support to an over 13% surge in under two weeks.
US light crude for the soon-to-expire November contract ticked up 5 cents to $89.52 a barrel by 0049 GMT, following a hefty gain of $2.07 a barrel on Thursday’s close.
The contract touched $90.02 in after-hours trade, the sixth record high in as many trading sessions in a nearly unbroken bull run fuelled by an infusion of fund money seeking to avoid markets battered by the global credit crunch.
The dollar fell to a new record low against the euro on surprisingly weak US job market and manufacturing data, plus a one-third fall in earnings from the No. 2 US bank, tipping expectations toward another interest rate cut.
“The dollar weakened further spurring some investment into oil as a hedge against dollar weakness," said David Moore, commodity strategist from the Commonwealth Bank of Australia.
“And there are still concerns that oil market conditions will remain tight over the northern winter."
The rally in oil and other commodities from below $70 in mid-August has been aided by central banks pumping money into financial markets to keep them operating smoothly through the credit squeeze, with investors keen to put those funds to use.
The flare-up in political tension between Turkey and Kurdish rebels in northern Iraq has supported gains as traders fear it may stem the flow of Iraq’s sporadic northern oil exports, or eventually disrupt broader Middle East shipments.
Iraq is anticipating only limited Turkish air strikes on separatists, its foreign minister told Reuters on Thursday, the day after Turkey’s parliament gave its military the green light to hunt members of the Kurdish Workers Party.
Oil’s climb toward an inflation-adjusted peak above $100 has alarmed Opec, which may call for an early formal meeting to discuss a second output increase as many analysts said its September agreement to raise production by 500,000 barrels a day from November was proving insufficient to put a brake on prices.
Although US oil stocks rose last week, crude inventories stand about 4% below a year ago, while gasoline and distillate stocks are about 7% below last year, according to the latest government data.
Stockpiles of crude at Cushing, Oklahoma, the delivery point for oil traded on the New York Mercantile Exchange, were nearly a fifth below last year.
Oil has averaged just over $67 a barrel this year, but is now nearing the inflation-adjusted monthly average high of $101.70 hit in April 1980, a year after the Iranian revolution.
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