Singapore: Oil prices bubbled near $110 in Asian trade Thursday within striking distance of a fresh record, buoyed by the falling US currency, dealers said.
Big investor demand for commodities to hedge against inflation and the weakening dollar were both boosting crude prices, which burst through $110 per barrel for the first time on Wednesday, they said.
In morning trade, New York’s main contract, light sweet crude for April delivery, was at $109.76 per barrel, off 16 cents from its record closing high of $109.92 in US trading hours Wednesday.
The contract had earlier Thursday briefly traded at an intra-day high of $110.12 .
New York oil prices set an all-time trading high of $110.20 on Wednesday before registering the record closing price of $109.92.
Meanwhile, London’s Brent North Sea crude for April delivery eased 16 cents to $106.10 on Thursday.
“Fundamentals are well and truly out of the window when it comes to oil prices,” said Jan Lambregts, head of regional research at Rabobank in Hong Kong.
“A lot of money’s obviously looking for a place to park and crude oil appears to be one popular destination among commodities in general,” he said.
The ailing greenback has helped fuel the spike in world oil prices because crude is priced in dollars and becomes more affordable for purchasers holding stronger currencies.
The US unit slumped to a 12-year low against the yen and to a new all-time nadir versus the euro in Asian trade Thursday as investors bet on a hefty cut in US interest rates next week, dealers said.
The dollar was as low as 100.95 yen in Tokyo morning trade, the lowest level since December 1995 and down sharply from 101.79 yen in New York.
The euro briefly hit $1.5575, eclipsing its previous record high of 1.5570 set in New York on Wednesday, before easing back to $1.5545 in Tokyo late morning trade.
Economists say the spike in world oil prices is boosting inflation, including in the US, which is struggling with other economic challenges and could already be in recession.
“Ultimately something’s got to give. A US recession should provide enough of a cyclical headwind to see a near-term correction in crude oil prices,” Lambregts said.
The correction could be “particularly vicious,” he added.
Prices have blazed a record-breaking trail in recent weeks, smashing through $107 and $108 in New York on Monday and $109 Tuesday.
The International Energy Agency (IEA), which seeks to coordinate energy policy among the world’s leading industrialised nations, said it would convene a meeting of oil industry experts to review the price spikes.
“There will be a meeting (Monday in Paris) on prices with experts, both from the financial and (oil) trading sectors, as well as with representatives of the production and refining sectors,” an IEA spokeswoman told AFP.
Meanwhile, the US Department of Energy said Wednesday that US crude oil stocks had risen 6.2 million barrels last week, far above the gain of 1.7 million that most analysts had predicted.