Oil surged to another record high this week, passing the $93-a-barrel mark after Mexico briefly halted one-fifth of its production and the dollar dropped.
Analysts are expecting oil to hit $100 in the near future if the price rises continue as strongly as they have in recent days. United States crude hit a high of $93,20, almost a dollar higher than the peak reached on Friday. It later traded at $92,66. London Brent also leapt to a record high of $90, before settling at $89,80.
Adjusting for inflation, however, crude oil is still below the $101,70 peak hit in April 1980 after the Iranian revolution.
Oil prices have soared by a third since mid-August on the back of rising tensions in the Middle East, dollar weakness and supply fears ahead of winter in the northern hemisphere.
This week’s gains come after Pemex, Mexico’s state-owned oil company, announced cuts of 600Â 000 barrels a day of oil output for two days because of bad weather in the Gulf of Mexico.
Meanwhile, the dollar hit another record low against a basket of currencies on expectations that the US Federal Reserve would trim interest rates to soften the impact of a deteriorating housing market and slowing economy.
This has raised speculative buying of oil by investors trying to hedge losses. Analysts say another cut in US interest rates could send the dollar lower, therefore pushing the price of oil even higher.
Strong demand comes as reports show that oil stocks in the US are lower than expected. However, Opec is reluctant to increase production levels as it believes the oil market is well supplied and the strength of the oil price is down to geopolitical factors. — Â