Singapore: Oil traded higher at more than $132 a barrel Monday as the US summer driving season kicked off, underscoring concerns that output was inadequate amid rising demand.
Tightness in the oil market has made prices sensitive to a confluence of factors, including a weak US dollar, speculative funds, an unwillingness by oil-producers to raise production and geopolitical tensions, analysts said.
In midday Asian trade, New York’s main oil futures contract, light sweet crude for July delivery, was up 46 cents to $132.65 a barrel, after closing at $132.19 a barrel in New York on Friday.
Electronic trading on the New York Mercantile Exchange was unaffected by the US Memorial Day holiday on 26 May.
The US summer driving season, which kicked off at the weekend, is a time when Americans take to the roads on their vacations, boosting fuel demand in the world’s biggest economy and affecting global prices.
London’s Brent North Sea crude for July delivery was trading at $131.90 a barrel, up 33 cents.
On Thursday, Brent struck an all-time high of $135.14 and New York crude reached a record $135.09, before both contracts plunged as investors banked profits.
Mark Pervan, senior commodities strategist at ANZ Bank, said buying ahead of the reopening for floor trading in New York on Tuesday pushed prices higher.
Expectations the dollar will continue to struggle has also made the market more attractive because a weak US currency makes dollar-commodities such as oil cheaper for foreign buyers.
“A lot will depend on the performance of the US dollar. I think trading will be dictated by the currency markets this week,” Pervan said.
“Investors were positioning on expectations the US market will reopen strong on 27 May,” he added.
Investors were also waiting for a batch of economic data due this week as well as speeches by Federal Reserve officials for fresh clues on the outlook for US interest rates.
“Oil prices don’t seem to be stopping their upwards march and are pressuring the (US) economy,” said Kazuhiko Shibata, Tokyo branch manager at Dresdner Bank.
“Recent market optimism that the economy might be nearing the end of its slump has waned,” he added.
Crude futures have risen by more than a third since the beginning of 2008 when they struck $100 for the first time, lifted by unrest in some of the oil-producing countries, falling energy inventories, high Asian demand for fuel and a weak dollar.
Reluctance by the Organisation of Petroleum Exporting Countries (OPEC) to hike their output has also helped keep prices high.
OPEC secretary general Abdalla Salem El-Badri said last week that the cartel’s members were unhappy with surging prices which he blamed on speculators and a weak dollar.
OPEC, which produces 40% of the world’s oil, is reluctant to bend to US-led demands for it to pump more crude to help cool rocketing prices.
The 13-nation cartel insists that the market is well supplied and that record prices reflect speculative investment activity rather than actual supply and demand conditions.