Oil prices surged to record highs yesterday as the weakening U.S. dollar drove up investments in commodities.
A trader deals crude oil futures at the New York Mercantile Exchange in New York. Oil prices are surging to record highs as the weakening U.S. dollar drives investments into commodities. Photo: AP |
Light, sweet crude for May delivery rose as high as $114.53 a barrel in electronic trading on the New York Mercantile Exchange before retreating to $113.74 by the afternoon in Europe, down 5 cents.
The contract closed at a record $113.79 a barrel Tuesday and then jumped in after-hours trading to an all-time high of $114.08.
In London, June Brent crude contracts were down 6 cents to $111.52 a barrel on the ICE Futures exchange, after setting a new record of $112.35 earlier in the session.
Analysts said the oil increases were being caused by record lows for the dollar – $1.5966 per euro – as higher inflation in the euro zone practically eliminated the chances of an interest-rate cut by the European Central Bank.
Annual inflation in euro nations rose to a record 3.6 per cent in March, boosted by higher prices in transport fuel, heating, dairy products and bread, said Eurostat, the EU’s statistical agency. It is the highest inflation rate in 16 years.
Olivier Jakob of Petromatrix in Switzerland said there had been a ”very strong correlation” between rising oil prices and the weakening dollar in the last few months, which appeared to have been broken at the start of this week.
”Monday and Tuesday crude oil managed to move ahead without the help of the dollar,” Jakob said. ”But once we broke above 1.59 euros per dollar and as we move toward 1.60, there’s going to be more buying coming into oil.”
Analysts said growing investor demand for commodities – which have performed better than other financial instruments – also propped up prices.
”This is really driven by investors purchasing oil because returns have simply outpaced those of stocks and bonds,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Shum said he didn’t think supply and demand fundamentals were that strong, but added that ”oil’sprice rise seems unstoppable.”
Oil’s recent run above $100 a barrel has been largely attributed to speculators, as a steadily depreciating U.S. currency drivesinvestments in hard commodities such as oil and gold.
Traders were awaiting the release of U.S. data Wednesday on the state of America’s petroleum supplies. Last week’s EIA report showed an unexpected drop in crude inventories, which started oil on its way to several records.
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