Singapore: Oil eased from record levels in Asian trade Tuesday but underlying momentum remained strong because of the weak greenback and supply concerns, dealers said.
In morning trade, New York’s main contract, light sweet crude for April delivery fell 19 cents to $107.71 a barrel from its record finish of $107.90 in US trading hours Monday.
The contract had surged to a new trading high of $108.21in New York Monday as investors bet on oil prices to continue marching north on expectations the greenback would remain weak.
London’s Brent North Sea crude for April delivery dropped 11 cents to $104.05 a barrel. The contract hit a trading high of $104.42 Monday and closed at a new record $104.16.
OPEC’s decision last week to keep its daily production levels unchanged despite pressure from the United States, the world’s biggest energy user, was also lending support to the market, dealers said.
Investors are also rushing into the commodities markets, including oil, which they regard as safe havens, they said.
“There’s increased nervousness about other asset classes so I think we are seeing by default, funds flowing into commodities (including oil),” said Mark Pervan, a senior commodity strategist with Australia’s ANZ bank in Melbourne.
“It is really seen as a safe haven at the moment so there is a lot of momentum which can continue to push prices higher,” he said.
Meanwhile, US President George W. Bush’s administration has signaled that Vice President Dick Cheney personally would urge OPEC kingpin Saudi Arabia to convince the cartel to boost output.
The US economy is seen as the worst hit if oil prices continue to skyrocket because of its heavy dependence on imported oil and the weak greenback exacerbates the situation, dealers said.
“The US market is really feeling the pinch,” said Pervan. “One is slowing growth and they bear the full brunt of high prices in terms of US dollars.”
The weak US currency, which fell to a new low of 1.5464 against the euro last week, encourages demand for dollar-priced commodities like oil because it makes them cheaper for buyers using other currencies.