Crude oil rises past $102 mark

Updated: 2008-02-28 07:07

Crude oil rose to a record above $102 a barrel as a weakening dollar spurred investors to buy commodities priced in the US currency.

Futures jumped in New York and London as the dollar fell to an all-time low against the euro.

The UBS Bloomberg Constant Maturity Commodity Index rose to the highest ever, on gains for gold, silver, sugar, copper and coffee.

"This record is purely a play on the weakness of the dollar, as investors use both crude and gold as a hedge against inflation," said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland.

"If the dollar keeps getting weaker, and we don't have inventory builds today, it could drive prices towards $105."

Crude oil for April delivery increased as much as $1.20, or 1.2 percent, to $102.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $101.35 at 10:52 am London time.

Prices pared gains after a Persian Gulf official familiar with Saudi Arabian oil policy said prices are higher than they should be and inventory gains are likely to continue through to the second quarter.

The dollar weakened to $1.5088 a euro, the lowest since the European single currency was introduced in 1999.

The dollar has declined against all of the world's 16 biggest currencies in the past 12 months apart from the South Korean won and South African rand.

'Intrinsic value'

 

A motorist sits in his car while the tank is being filled at a gas station in Manila, the Philippines. Bloomberg News

"Because oil has an intrinsic value, it's not exactly sensible that it becomes cheaper in other currencies so you get an adjustment upward in the US dollar value of oil," said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd in Sydney.

"The general strength of commodity prices would instantly improve sentiment toward the oil price."

Gold, up 15 percent this year, rose to a record $963.09 an ounce yesterday in London, while silver advanced to a 27-year high.

Among agricultural commodities, Robusta coffee climbed 2.1 percent on the Liffe exchange.

Brent crude for April settlement climbed as much as $1.06 to $100.53 a barrel on London's ICE Futures Europe exchange, the highest since trading began in 1988. It traded at $99.90 at 10:52 am local time.

Hedge-fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended Feb 19, according to a Commodity Futures Trading Commission report issued at the end of last week.

OPEC supply

OPEC crude-oil supply will fall 200,000 barrels a day, or 0.6 percent, to 32.45 million barrels a day this month, according to preliminary estimates from PetroLogistics Ltd.

The group supplied 32.65 million barrels a day in January, data from the Geneva-based tanker-tracking service showed.

Ministers from the 13 members of the Organization of Petroleum Exporting Countries are scheduled to meet in Vienna on March 5 to discuss oil quotas. OPEC produces more than 40 percent of the world's oil.

Oil supply and demand are in balance and the price isn't in line with market fundamentals, the Persian Gulf official said, speaking on condition of anonymity.

Agencies

(China Daily 02/28/2008 page17)