BackOil spikes above $102 a barrel on weakening dollar
Oil spikes above $102 a barrel on weakening dollar
Singapore: Oil prices rose to a new intraday high above US$102 a barrel on 27 February 2008 as a slide in the US dollar prompted investors to pump more money into energy futures as a hedge against inflation.
The dollar sank to a record low against the Euro after the release of three disheartening US economic reports a day earlier that show that the economy is slowing even as prices are rising. The dollar’s decline prompted investors to seek a safe haven from turmoil in the financial markets and the threat of inflation.
“Crude has cracked through the US$100-level again and that’s driven by financial investors moving money into commodities markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
“The US dollar weakened against the Euro and the economic data also indicated that inflation in the US rose in January, and commodities are generally considered a hedge against inflation," Shum said. “We are therefore seeing these strong prices that have really little to do with oil market fundamentals."
Light, sweet crude for April delivery spiked as high as $102.08 (Rs4,080) a barrel in electronic trading on the New York Mercantile Exchange before slipping back to $101.23, up 35 cents.
The contract on 26 February jumped $1.65 to settle at $100.88 a barrel, a record close.
In London, Brent crude added 33 cents to $99.80 a barrel on the ICE Futures exchange, below the intraday record of $100.30 a barrel set earlier in the session.
The US Labour Department said wholesale inflation rose by 1% in January on soaring oil and food costs. And Standard & Poor’s also reported that US home prices fell 8.9% in the last three months of 2007 from a year earlier.
A report by the Conference Board, a business-backed research group, that its Consumer Confidence Index fell to the lowest since February 2003, far below what analysts had been expecting, indicated that consumers might continue to curb their spending in the coming months.
But traders in both the energy market and the US stock market, which also advanced sharply, seemed largely unfazed. Oil has risen in recent days amid an increase in speculative buying, with some traders believing that global demand will be high enough to support higher crude prices even if the American economy is slowing.
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