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Weaker dollar sends oil prices to record $114.53
Agencies
Published in The Saudi Gazette on 17 - 04 - 2008

Oil prices surged to record highs Wednesday as the weakening US dollar drove up investments into commodities.
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.
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 euro's new highs against the US currency - $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.
The euro struck an all-time peak of $1.5969 Wednesday as eurozone inflation spiked to a record high, dampening hopes of an ECB rate cut to help tackle slowing economic growth, analysts said. The European single currency later changed hands at $1.5949 against 1.5789 late Tuesday.
The euro hit a series of new heights Wednesday following news that eurozone inflation had reached 3.6 percent in March, the highest annual rate since the launch of the European single currency in 1999. Following the eurozone data, the US government said that US consumer prices had risen modestly in March after a surge in motor fuel and food costs in recent months.
Annual inflation in euro nations rose to a record 3.6 percent 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 helped prop 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's price rise seems unstoppable.”
Oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating US currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.
Traders were awaiting the release of US government data later 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.
The US Energy Information Administration was expected to report later in the day that crude inventories grew 1.5 million barrels last week, according to a survey of analysts by Platts, the energy research arm of McGraw-Hill Cos.
Gasoline inventories were expected to decline 2 million barrels, to post their fifth consecutive weekly drop amid increasing demand for the fuel, the survey showed.
“Implied gasoline demand typically starts to increase at this time of year, but high prices at the pump and a slowing US economy appear to have dented the pace of demand growth,” the Platts report said.
Analysts also projected a 1.7 million barrel drop in distillate stocks, which include heating oil and diesel, while refinery utilization rates were expected to jump 0.9 percentage points to 83.9 percent.
“The market may choose to focus on the expected product drawdowns and interpret the report as bullish,” Shum said.
“But product inventories in the US are at healthy levels. The declines would simply be because refinery utilization operating rates have not been strong, and that's because refiners are responding to weak demand.”
Crude prices were also supported by reports of a number of supply disruptions.
Attracting the most attention was the closure of Mexico's three main oil-exporting ports on the Gulf Coast because of bad weather that started Sunday. Only one of the ports remained closed Tuesday, according to Mexico's Communications and Transportation Department.
In other Nymex trading, heating oil futures added 3.11 cents to $3.3050 a gallon (3.8 liters) while gasoline prices rose 0.25 cent to $2.8835 a gallon. Natural gas futures were up 0.5 cent to $10.210 per 1,000 cubic feet. __


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