Oil price retreats below $98

Oil price retreats below $98

Singapore: Oil retreated below $98 in Asia trade Thursday after rising to within striking distance of the symbolic 100-dollar level.

Dealers said investors were taking a cautious stance to protect their positions since US financial markets were closed Thursday for the Thanksgiving holiday.

In early morning trade, New York’s main contract light sweet crude for January delivery rose five cents to $97.34 a barrel from $97.29 in late US trades Wednesday.

The contract had spiked to a new peak of $99.29 on Wednesday to within touch of $100 on continued concerns over tight global supplies, dealers said.

David Moore, a commodity strategist with the Commonwealth Bank of Australia, said he had expected prices to rise after latest US government data showed a decline in the country’s crude reserves.

“I thought the inventory data would be supportive of the market," Moore said. “It may have been investors were cautious ahead of the Thanksgiving holiday."

The US Department of Energy (DoE) announced Wednesday that reserves of US crude oil had sunk by 1.1 million barrels in the week ending 16 November. Analysts’ consensus forecast had been for a gain of 750,000 barrels.

The DoE added that US reserves of distillates, including crucial heating fuel and diesel, dived by 2.4 million barrels last week.

That was far heavier than market expectations for a drop of 450,000 barrels.

Heating fuel demand is expected to pick up as the northern hemisphere winter kicks in next month and the US northeast region is the world’s biggest user of heating oil.

Moore said the market can expect continued volatility in the weeks ahead as tight global supplies and geopolitical tensions in the Middle East continue to worry investors.

“The oil prices are certainly volatile and the outlook is obviously subjected to a lot of uncertainty," said Moore.

“For that reason, we will see oil prices move higher in the near term... it is still possible for oil prices to go above 100 dollars," he said.

Crude oil prices have surged by about 64% since the start of 2007, energized by supply disruptions in key producers such as Nigeria, geopolitical jitters over the Iranian nuclear crisis, and strong demand from China and India.

Oil prices were also winning support from a troubled dollar, which Wednesday dived to a fresh record low point against the euro.

The European single currency surged to a historic high this week of $1.4855, as the US currency was hit by renewed worries about the outlook for the American economy, analysts said.

A weak dollar encourages demand for commodities like oil, which are priced in the greenback, because they become more attractive to investors using stronger currencies.