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04 Mar 2008 12:08
Oil eased on Tuesday after it reached a record of almost $104 a barrel in the previous session, buoyed by investor demand for commodities as well as expectations Opec will not increase supply despite high prices.
United States light crude for April delivery was down 44 cents at $102,01 a barrel by 10.30am GMT, after touching a record high of $103,95 on Monday.
Prices retreated from the peak later on Monday to settle 61 cents higher at $102,45.
London Brent crude was down 38 cents at $100,10.
“Large financial flows are heading to commodities because of the falling dollar and falling stocks markets, even if fundamentally, there is no reason for prices to rise further,” said Marc Lansonneur, Société Générale’s head of commodities derivatives in Asia.
The dollar recovered slightly from record lows against the euro and a basket of currencies on Tuesday.
The risk that inflation could be on the rise has also increased the attractions of “real assets” such as gold, other metals and oil.
Gold hit a record just short of $990 an ounce on Monday. Platinum has hit a record for the second day in a row and copper has risen 26% since the start of this year.
“Money managers are taking one look at the sorry state of investment alternatives out there and deciding that they will put their money into commodities,” said Edward Meir, analyst with broker MF Global.
Comments from oil ministers gathering for a meeting of the Organisation of the Petroleum Exporting Countries in Vienna on Wednesday suggest the oil producer group will not raise output.
“I don’t think Opec would consider increasing production because then we would be increasing to meet demand that doesn’t exist,” Opec president Chakib Khelil said.
A Reuters survey found Opec output fell slightly in February, its first decline in six months, reflecting the view by some analysts that Opec members are trimming production to prepare for seasonally lower demand in spring.
The group is still pumping 110 000 barrels per day above its agreed target.
Latest US government data on domestic fuel stocks look set to support Opec’s assertion that supplies are plentiful.
US crude oil inventories are forecast to have risen last week for the eighth week in a row, according to Reuters’ preliminary poll.
Analysts predict a 2,5-million-barrel increase in crude stocks, a drop of 1,8-million barrels in distillates and a 300 000-barrel build in gasoline stocks, already at a 14-year high.
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