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SINGAPORE: World oil prices continued higher toward
$107 in Asian trade Monday as a weakening US dollar and negative
news on the US economy drew investors into commodities, dealers
said.
In morning trade, New York’s
main oil contract, light sweet crude for delivery in May, rose 34
cents to $106.57 per barrel.
The benchmark contract jumped
$2.40 to close at $106.23 a barrel during floor trading on Friday at
the New York Mercantile Exchange.
Brent North Sea crude for May
climbed four cents to $104.94 a barrel, after settling at $104.90 on
Friday in London. The contract had rallied $2.38 at the close.
“The oil market is
strengthening on the back of the weak dollar on one hand while the
economy is slowing down, decreasing oil demand,” said Victor
Shum, senior principal at Purvin and Gertz energy consultancy in
Singapore.
“The market should actually
soften, but financial investors help prop up prices because of the
weak dollar,” he said.
The greenback sank further
against the euro on Friday after news that US employers cut a
surprisingly large 80,000 jobs in March, the biggest decline in
employment in five years, according to a government report.
The weak US currency tends to
encourage demand for dollar-priced crude because it becomes cheaper
for foreign buyers.
On Monday morning the euro traded
at $1.5699, down from $1.5736 in New York late Friday.
Friday’s jobs report prompted
many commodity fund investors to bet on fresh falls for the dollar,
traders said.
Alaron Trading analyst Phil Flynn
said, “Bad economic news is good for commodities” in the near
term.
Despite the speculative push, the
trend should be lower for oil futures since slower economic growth
will mean softer demand, Mike Fitzpatrick at MF Global said.
“Fundamentals should prevail
and exert downward pressure on oil to keep a lid on increasing
prices,” Shum said.
Many traders are concerned that
slowing US growth could prompt lower energy demand because the
United States is the world’s biggest consumer of energy.
Some economists say the United
States has already entered a recession.
OPEC Secretary-General Abdullah
al-Badri rejected calls from oil-consuming states for a hike in the
cartel’s crude output, saying non-fundamental factors were to
blame for current high prices.
“At the moment there is enough
oil in the market and no need to change OPEC’s output,” al-Badri
said in Tehran late Saturday.
He blamed the “US economic
recession, lack of refining capacity and depreciation of the
dollar’s value” for the record oil prices, according to state
television.
The Organization of Petroleum
Exporting Countries (OPEC)—which produces 40 percent of the
world’s oil—at its last meeting in March maintained its daily
output at 29.67 million barrels.
--AFP
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