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Oil price rockets to 110 dollars a barrel

Latest update : 2008-03-11

World oil prices continued their record charge Tuesday, rocketing close to 110 dollars amid lingering supply concerns and as the US dollar plumbed fresh lows against the euro.

Traders say oil prices have also been propped up because "black gold" is priced in dollars and buyers and speculators armed with stronger currencies than the US dollar are buying up oil contracts.
New York's main oil futures contract, light sweet crude for delivery in April, finished up 85 cents at a record closing high of 108.75 dollars per barrel after hitting an all-time intra day high in earlier trading of 109.72 dollars.
In London, Brent North Sea crude for April delivery settled up 1.09 dollars at 105.25 dollars after earlier jumping to a record intraday high of 105.82 dollars.
"Oil rewrites the record books as the once mighty dollar sinks further into obscurity," Phil Flynn, a market analyst at Alaron Trading, said in a briefing note.
The European single currency jumped to a record high of 1.5495 dollars earlier Tuesday before retreating to around 1.5346 dollars.
"The powerful upsurge in oil prices shows little signs of abating," wrote Barclays Capital analysts.
"With prices now in sight of the 110-dollar mark, the debate on how much higher oil prices can go has intensified considerably."
Some analysts said oil prices could ease in coming months amid concerns about slowing US economic growth.
Other analysts believe that surging energy demand from China and India would soak up US demand if it declines, however.
Prices have blazed a record-breaking trail in record weeks, smashing through 107 and 108 dollars 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 fundamentals" of supply and demand, they added.
The Paris-based International Energy Agency warned that high prices would likely be a reality for some time to come.
"We are in an era of higher oil prices," the IEA said in a monthly market report.
The IEA trimmed its monthly estimate for world oil demand this year to 87.5 million barrels per day, "with downward pressures from weaker economic growth in the OECD mostly offset by stronger former Soviet Union (FSU) projections."
Oil demand was forecast to increase by 1.7 million barrels per day in 2008 or 2.0 percent compared with 2007, when it grew by 1.1 percent.
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 by 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 crude on speculative buying as investors seek hedges against a weakening dollar and rising inflationary pressures.

Date created : 2008-03-11