Singapore: Oil prices soared to new highs above $111 (Rs4,489) in Asian trading on 17 March as the US currency slumped to another fresh low against the euro, sparking a rush of funds into commodities including crude, dealers said.
In afternoon trading, New York’s main contract, light sweet crude for April delivery was trading at $111.18 a barrel after soaring earlier to a fresh all-time high of $111.42.
New York oil prices closed on 14 March at $110.21 at the end of US trading hours, a day after hitting $111 for the first time in its history. Brent North Sea crude for May delivery was up 80 cents to $107. The April contract expired Friday at $107.54.
The latest record-setting mark in New York oil prices came as the euro rose to a lifetime peak of $1.5905 in Asian trading on 17 March while the US currency fell to as low as 95.75 yen, a level not seen since September 1995.
The US currency’s continued plunge against the euro and other major units is triggering a flood of funds into commodities such as oil which are seen as safe havens amid rising concerns over the US economy and financial turmoil from a global credit squeeze.
“At the moment it really seems to be a case where the continued dollar weakness appears to be the key driver for oil,” said Gerard Burg, a minerals and energy economist with National Australia Bank in Melbourne.
“The kind of evidence we are seeing at the moment in the US equity markets is counter cyclical to the commodity markets,” he said. In the near-term, oil prices are likely to trend higher with no relief seen for the US currency as investors worry about the US financial system following the woes of Bear Stearns.
“We can continue to expect strong prices for oil and commodities like gold in the near term,” said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore. The ailing greenback has helped drive up oil prices because crude is priced in dollars and becomes more affordable for purchasers holding stronger currencies.
Investors view oil futures as a hedge against inflation and the weak dollar. Societe Generale said in a report Monday the “US dollar is under sustained pressure... any relief rallies are being swiftly sold.”
Oil prices have rocketed by 90 percent over the past year as the market was driven by tight supplies, geopolitical concerns in key producer nations and fierce demand for crude from China and India. Prices have gained about 11 percent in value since the start of 2008, accelerating after the OPEC oil cartel held output at current levels at a meeting in early March.