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15 Apr 2008 16:25
Oil set new record highs above $113 a barrel on Tuesday as investors sought to hedge against a battered dollar.
Britain’s Prime Minister Gordon Brown called on oil producers to take action to dampen prices ahead of talks with United States President George Bush where Brown said they would discuss collective action to bring prices down.
US crude rose by $1,80 to $113,56 a barrel at 2.05pm GMT, after touching a record high of $113,93.
London Brent crude was up by $1,91 at $111,75, after a record high of $111,85. The May Brent futures contract was to expire later on Tuesday.
“One thing that is clearly driving the oil price is that the US dollar has gotten substantially weaker in the past several months and quarter,” said Richard Batty, of Standard Life.
“The volatility in asset markets—mainly equities—has pushed investors towards commodities.”
The dollar recouped some of its losses against the euro after US Treasury data showed foreigners increased purchases of US assets in February.
A weak dollar tends to raise prices for commodities denominated in that currency by boosting non-US spending power and by attracting investors seeking an inflation hedge.
Dealers said oil’s climb to new record highs had sparked a fresh wave of buying.
Tetsu Emori, fund manager at Astmax, said prices had risen due to automatically placed buying orders once the previous record had been breached. He saw the next resistance target at $115.
British Prime Minister Gordon Brown was to urge oil-producing countries to act to counter high prices in a speech later on Tuesday, according to excerpts from the speech.
“The market needs to be adequately supplied and oil-producing countries have their responsibility to respond to higher oil prices,” Brown said in the speech.
Brown, who is due to travel to Washington on Wednesday for talks with Bush, said he planned to discuss collective action to bring down oil prices.
The Organisation of the Petroleum Exporting Countries (Opec), which pumps more than one-third of the world’s oil, says it is producing enough and that a US economic slowdown may weaken consumption in the second quarter.
“Current Opec production at more than 32-million barrels per day will be sufficient to both meet demand growth and contribute to further stockbuilds,” it says in its latest monthly oil-market report.
Opec has pointed to US dollar weakness, speculative inflows and political tensions as key factors driving prices rather than a lack of oil.
US gasoline (petrol) futures hitting fresh highs on Monday also helped prices. They rose as the US gears up for the summer driving season, when demand traditionally peaks.
US crude oil inventory figures are due on Wednesday. They likely rebounded last week after a surprise drawdown the week before, with an increase in imports lifting supply, according to a preliminary Reuters poll of eight industry analysts.—Reuters
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