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SINGAPORE: Oil prices were close to $109 in Asian
trade on Wednesday, underpinned by the dollar’s dive to a new low
against the euro and supply concerns, dealers said.
In late morning trade, New
York’s main contract, light sweet crude for April delivery, traded
briefly at $108.90 a barrel, up 15 cents from its record closing
high of $108.75 on Tuesday.
At 12 p.m. (04:00 GMT), the
contract had eased to $108.64.
New York prices spiked to a new
all-time high of $109.72 Tuesday, putting it within touching
distance of the $110 mark.
London’s Brent North Sea crude
for April delivery gained three cents to $105.28 a barrel from its
record close of $105.25. The contract traded at a new high of
$105.82 on Tuesday.
“The oil market is really
soaring to unprecedented heights primarily due to funds and the
speculators putting money into oil and other commodities,” said
Victor Shum, an analyst with Purvin and Gertz energy consultancy in
Singapore.
“Money always looks for better
returns,” he said, adding investors who are flushed with cash see
commodities offering “a hedge against the weakening dollar and
inflation.”
The dollar recovered some ground
in Asian trading Wednesday, trading at 1.5347 to the euro after
sinking to a fresh low of 1.5495 Tuesday.
With the greenback mired in a
slump and OPEC refusing to pump more crude despite pressure from the
United States, oil prices are likely to continue to trend higher,
dealers said.
“At the moment, there doesn’t
seem to be anything that is holding it back,” said Gerard Burg,
minerals and energy economist at National Australia Bank in
Melbourne.
“The fundamental position of
the market remains pretty sound,” he said.
Prices have blazed a
record-breaking trail in recent weeks, smashing through $107 and
$108 in New York on Monday.
“Currently, concerns over a
weakening US economy are leading investors to find a haven in
commodities as the dollar weakens on expectations of further cuts in
US interest rates,” energy consultancy John Hall Associates said.
“This is outweighing the impact
of the fundamentals of supply and demand,” they added.
The Paris-based International
Energy Agency (IEA) also warned that high prices would likely be a
reality soon.
“We are in an era of higher oil
prices,” the IEA said in a monthly market report.
OPEC’s decision to keep its
production quotas at current levels despite pressure from the
world’s biggest energy user, the United States, is also lending
support to the market, dealers said.
The Organization of the Petroleum
Exporting Countries (OPEC) decided at a policy meeting last week to
keep its daily output target of 29.67 million barrels despite calls
from US President George W. Bush for it to review boosting output.
OPEC, which produces 40 percent
of the world’s crude, blamed the high cost of oil on speculative
buying as investors seek hedges against a weakening dollar and
rising inflationary pressure.
--AFP
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