Crude oil passes the $130 mark

Oil prices rose above US$130 a barrel for the first time yesterday as supply concerns mounted and the dollar weakened.

Light, sweet crude for July delivery increased to a trading record of $130.47 a barrel in electronic trade on the New York Mercantile Exchange after closing at $128.98 in the floor session.

It later retreated to $130.36 a barrel, up $1.38.

The June contract, which expired on Tuesday, settled overnight at $129.07 a barrel.

The dollar slid to a one-month low against a basket of currencies yesterday as the euro was pushed higher by expectations of higher euro zone interest rates.

The US currency had become less of a factor as attention turned to supply and demand concerns, but that seems to have changed this week.

"We've seen an about-face turn on the dollar in the last couple of days," said Mark Pervan, senior commodity strategist at Australia & New Zealand Bank in Melbourne.

"It looked like it was starting to recover, but I think there's a less certain outlook at the minute and ... enough reason to be buying commodities as a currency hedge again," added Pervan.

Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls.

A weak dollar also makes oil less expensive to buyers dealing in other currencies.

The performance yesterday was the 11th time in the last 13 sessions that crude prices have hit trading or closing records, if not both.

Futures soar

Oil futures are now selling for about twice what they were just a year ago.

Oil for delivery in December 2016 surged $17.08, or 14 percent, in the past three trading days since Goldman Sachs Group Inc, the world's biggest securities firm by market value, forecast oil would average $141 in the second half of 2008 on constraints in production and a lack of substitutes.

Prices have been propelled by a number of factors, including worries about insufficient supply, soaring global demand and a sliding dollar that has made oil cheaper for some buyers overseas.

Speculative buying has also helped push prices higher, analysts say.

Agencies

(China Daily 05/22/2008 page17)