Oil leapt more than $3 a barrel to a new record high of $97 on Tuesday, closing in on the $100 mark, as a weak dollar and tight fuel stocks prompted buying by investors
Investors, wary of global equity markets where the full impact of the credit crunch has yet to become clear, see oil as a good bet, especially given tight fuel supplies in the run-up to the northern-hemisphere winter.
US crude rose by $2,86 to $96,85 a barrel by 3.52pm GMT, putting it on course to test $100. London Brent crude rose $2,67 to $93,16 a barrel, off highs of $93,38.
The prospect of more fallout from the US subprime crisis sent oil tumbling $2 a barrel on Monday as investors worried that slowing economic growth in the US would curb demand for fuel.
Those concerns persisted on Tuesday, pushing the dollar to record lows against a basket of major currencies. But stock markets recovered and gold hit a 28-year peak.
”We seem to be seeing a tug of war between people taking profits and those coming into buy into dips, and they are effectively saying we can go past $100,” said Mike Wittner at Societe Generale.
Oil’s surge from below $70 in mid-August has been stoked by a weak dollar and speculative inflows into oil and other commodities — and extended by evidence of dwindling supply.
US crude oil stocks were expected to have fallen a further 1,6-million barrels last week due to disruptions to short-haul Mexican shipments, a preliminary Reuters poll found.
Distillate inventories were seen falling by 700 000 barrels and gasoline stocks by 100 000 barrels.
Inventories in Japan, the world’s third-largest consumer, are also running below comfort levels.
”The temperatures in December in the north are expected to be below normal, so that is also a concern for us with the low inventories,” said Ken Hasegawa, of Fimat, Japan.
US Energy Secretary Sam Bodman said current prices are a ”terrible problem” for consumers, adding he hoped the Organisation of the Petroleum Exporting Countries (Opec) would ramp up output to ease prices. Many Opec officials have rejected that call.
Venezuelan Oil Minister Rafael Ramirez on Monday echoed other officials, saying high prices are due to speculation and geopolitical tensions, not a shortfall in supplies. — Reuters