VIENNA (AP) — Oil prices rose to a new intraday high above $102 a barrel Wednesday as a slide in the dollar prompted investors to pump more money into energy futures as a hedge against inflation.
The dollar sank to a record low against the euro after the release of three disheartening US economic reports Tuesday that show that the economy is slowing even as prices are rising. The dollar’s decline prompted investors to seek a safe haven from turmoil in the financial markets and the threat of inflation.
“Crude has cracked through the $100-level again and that’s driven by financial investors moving money into commodities markets,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
“The US dollar weakened against the euro and the economic data also indicated that inflation in the US rose in January, and commodities are generally considered a hedge against inflation,” Shum said. “We are therefore seeing these strong prices that have really little to do with oil market fundamentals.”
The Schork Report, edited by Stephen Schork, also attributed part of the climb to the weakness of the US currency, noting,” outside of the dollar-woes, there is no other reasonable driver behind this move.”
Light, sweet crude for April delivery spiked as high as $102.08 a barrel in electronic trading on the New York Mercantile Exchange before slipping back to $101.28.
The contract on Tuesday jumped $1.65 to settle at $100.88 a barrel, a record close.
In London, Brent crude added 33 cents to $99.80 a barrel on the ICE Futures exchange, below the intraday record of $100.30 a barrel set earlier in the session.
The US Labor Department said wholesale inflation rose by one percent in January on soaring oil and food costs. And Standard & Poor’s also reported that US home prices fell 8.9 percent in the last three months of 2007 from a year earlier.
A report by the Conference Board, a business-backed research group, that its Consumer Confidence Index fell to the lowest since February 2003, far below what analysts had been expecting, indicated that consumers might continue to curb their spending in the coming months.
But traders in both the energy market and the US stock market, which also advanced sharply, seemed largely unfazed. Oil has risen in recent days amid an increase in speculative buying, with some traders believing that global demand will be high enough to support higher crude prices even if the American economy is slowing.
In currency trading, the euro rose above $1.50 for the first time, reaching $1.5087 before falling back to $1.5040.
Analysts expect the US Energy Department’s Energy Information Administration to report later Wednesday that the nation’s crude oil stocks rose last week by 2.4 million barrels, which would be the seventh straight week of gains.
Gasoline inventories are expected to rise by 400,000 barrels while supplies of distillates, which include heating oil and diesel, fell by 1.8 million barrels last week, according to a Dow Jones Newswires poll of analysts.
Also supporting prices were concerns about supply disruptions from unrest in Iraq, a major oil exporter. Turkish ground forces pushed their offensive against Kurdish rebels deeper into the north of Iraq, seizing seven guerrilla camps, officials said Tuesday.
In other Nymex trading Wednesday, heating oil and gasoline futures were essentially steady at US$2.8165 and US$2.545 a gallon (3.8 liters).
Natural gas futures lost 4 cents, fetching US$9.166 per 1,000 cubic feet.