Oil and rice prices hit record high

Updated: 2008-04-18 06:35

SINGAPORE: Oil prices hit an all-time high above $115 a barrel Thursday as Asian rice prices soared to record levels to heighten fears of mass hunger in poor nations.

Oil peaked yesterday amid concerns about sagging US gasoline supplies ahead of the peak demand of the Northern Hemisphere summer. The US Energy Department said on Wednesday that inventories of gasoline fell 5.5 million barrels last week, a much bigger decline than forecast by analysts surveyed by Dow Jones Newswires.

Crude inventories fell 2.3 million barrels last week, the department's Energy Information Administration (EIA) also reported, compared to the gain analysts expected.

"The market has focused on the substantial draw in gasoline in the US and also the large crude oil draw," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The report has provided a knee-jerk reaction for the market and has driven oil to a new high."

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Light, sweet crude for May delivery rose as high as $115.21 a barrel in electronic trading on the New York Mercantile Exchange. It eased back to $114.75 a barrel, mid-afternoon in Singapore.

That is 18 cents lower than the overnight settlement record of $114.93 a barrel. During Wednesday's floor session, oil futures made their first move past the $115 mark.

The surge in oil prices reflected concerns about how much gasoline will be available during America's driving season.

The EIA report also said inventories of distillates, which include heating oil and diesel, unexpectedly rose last week by about 100,000 barrels. Analysts had expected a sharp decline.

Oil prices were also boosted by the falling dollar, which declined to a new low against the euro on Wednesday. Many investors buy commodities such as oil as a hedge against inflation and a falling greenback. A weaker dollar also makes oil cheaper to investors overseas.

Meanwhile, the surge in Asian rice prices showed no sign of abating yesterday as Thailand's benchmark grade jumped 10 percent to a record high, heightening fears over supplies of Asia's staple food.

In a clear sign of the strain on rice supplies after major exporters began to curb exports earlier this year, a tender from the world's top importer, the Philippines, attracted offers to sell only about two-thirds of the amount it was seeking.

In Bangkok, Thai 100 percent B trade white rice, considered the world's benchmark, hit a record $950 per ton, free on board, in yesterday's tender.

It has trebled since the start of 2007, raising the prospect of millions of people, especially in impoverished Asian countries, struggling to feed themselves.

"Everybody should realize that there will no longer be any cheap rice," Chareon Laothamatas, managing director of Uthai Produce Co Ltd, a leading exporter of premium grade fragrant rice, said.

The Philippines, where an escalating anxiety over rice supplies has become a hot political issue, received offers in its latest tender between $872.50 and $1,220 a ton, sharply higher than the just over $700 it paid in March.

Traders in Bangkok said other grades of rice from Thailand, the world's No 1 exporter, were also quoted higher.

Thai 100 percent parboiled rice was sold at $960 per ton to African countries for May and June shipment, while Thai 100 percent premium grade fragrant rice was sold at $1,200 per ton to Hong Kong and US importers, traders said.

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