Singapore: Oil prices were close to $109 in Asian trade on Wednesday, underpinned by the US greenback’s dive to a new low against the euro and supply concerns, dealers said.
In late morning trade, New York’s main contract, light sweet crude for April delivery, traded briefly at $108.90 a barrel, up 15 cents from its record closing high of $108.75 on Tuesday.
New York prices spiked to a new all-time high of $109.72 Tuesday, putting it to within touching distance of the $110 mark.
London’s Brent North Sea crude for April delivery eased one cent to $105.24 a barrel from its close record close of 105.25. The contract traded at a new high of 105.82 on Tuesday.
“The oil market is really soaring to unprecedented heights primarily due to funds and the speculators putting money into oil and other commodities,” said Victor Shum, an analyst with Purvin and Gertz energy consultancy in Singapore.
“Money always looks for better returns,” he said, adding investors who are flush with cash see commodities offering “a hedge against the weakening dollar and inflation.”
The dollar sank to a new low of 1.5495 against the euro Tuesday.
With the greenback mired in a slump and OPEC refusing to pump more crude despite pressure from the United States, oil prices are likely to continue to trend higher, dealers said.
“At the moment, there doesn’t seem to be anything that is holding it back,” said Gerard Burg, minerals and energy economist at National Australia Bank in Melbourne.
“The fundamental position of the market remains pretty sound,” he said.
Prices have blazed a record-breaking trail in record weeks, smashing through $107 and $108 in New York on Monday.
“Currently, concerns over a weakening US economy are leading investors to find a haven in commodities as the dollar weakens on expectations of further cuts in US interest rates,” energy consultancy John Hall Associates said.
“This is outweighing the impact of fundamentals” of supply and demand, they added.
The Paris-based International Energy Agency also warned that high prices would likely be a reality for some time to come.
“We are in an era of higher oil prices,” the IEA said in a monthly market report.