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Oil down from record high but still on the boil
SINGAPORE
Petroleumworld.com, Mar 14, 2008
Oil simmered down Friday after hitting a record 111.00 dollars per barrel overnight, but analysts said prices remain on the boil due to a sharp fall in the value of the US dollar.
New York's main oil futures contract, light sweet crude for delivery in April, was at 109.78 dollars per barrel in Asian trade, down 55 cents from its all-time closing high of 110.33 dollars in New York.
In earlier frenzied US trading, the contract had struck 111.00 dollars for the first time.
Brent North Sea crude for April delivery was down 62 cents to 106.92 dollars per barrel. It had touched an all-time intra-day high of 107.88 dollars on Thursday.
"We are seeing only a marginal movement," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney, noting that prices remained high.
Moore said the US dollar's softness was a "key factor supporting oil prices at the moment." Crude is priced in dollars and becomes more affordable for purchasers holding stronger currencies.
Investors view oil futures as a hedge against inflation and the weak dollar.
A decision by the Organisation of Petroleum Exporting Countries (OPEC) to keep production at current levels is also supporting higher oil prices, Moore said.
On Thursday, the beleaguered US currency plunged to an all-time low against the euro and fell below 100 yen for the first time in 12 years on weak US data and credit market turmoil.
While the dollar made a modest rebound in Asian trade Friday, investors remained nervous about the threat of a US recession, dealers said.
Dave Ernsberger, Asia oil director at energy intelligence provider Platts, said oil prices could ease ahead of the long Easter weekend next week, but he did not predict a major reversal.
Oil prices could still go beyond the all-time peak of 111.00 dollars, he said.
Saudi Foreign Minister Prince Saud al-Faisal said on Thursday that speculators were largely responsible for the price peaks, while some analysts cautioned that the market could be in a price bubble.
"The current turbulence on the oil market is due in large part to speculation and has nothing to do with market fundamentals, which are stable," the prince told the Organisation of the Islamic Conference summit in Dakar.
Saudi Arabia is a key OPEC member and is the world's biggest oil producer.
"Most of the rally in oil of late is not about supply and demand but really about the larger economic condition," said Phil Flynn, a market analyst at Alaron Trading.
"Oil is being used as a hedge against the dollar, no more and no less. And at some point, oil will disconnect as rising supply and slowing demand start to fall. Oil is in a bubble."
Story from AFP
AFP 14 0736 GMT 03 08Copyright© 2008 respective author or news agency. All rights reserved.
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