SINGAPORE (AP) – Surging oil prices are starting to pinch the pocketbooks of Asian consumers and could quicken inflation and slow economic activity in a region that has led global growth in recent years.
A jump in crude earlier this month to a 10-month high above $110 has sent fuel prices higher across Asia.
A liter of 92-octane gasoline at ExxonMobil stations in Singapore has risen six percent this year to 2.15 Singapore dollars a liter ($6.48 a gallon).
Higher oil prices have already made Asian policymakers think twice about cutting lending rates and implementing other stimulus measures designed to boost economic growth.
If crude gets much higher, it could force central bankers to raise rates, sacrificing growth to tame inflation.
Oil prices rose above $107 a barrel yesterday in Asia as traders bet an improving US economy will boost demand at a time when the ability to increase crude production is limited.
Benchmark oil for April delivery was up 68 cents to $107.02 at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.06 to settle at $106.34 per barrel in New York on Monday. Brent crude was up 19 cents at $125.53 per barrel in London.
A third straight month of strong US jobs growth in February has bolstered investor confidence that the recovery in the world’s biggest economy is strengthening and will eventually increase demand for crude.
The Federal Reserve is scheduled to hold a one-day policy meeting later Tuesday, and the oil market will be watching closely for any hint the central bank is considering stimulus measures to boost economic growth.
Analysts are also eyeing the possibility that global crude producers won’t be able to boost output enough to match demand if Iran’s four million barrels a day of production is cut.
“Global spare capacity has been dwindling, and crude demand is about to start rising seasonally,” said Citigroup, which expects Brent to average $130 in the third quarter. “Recent developments point to higher oil prices to come and the odds of a spike to new peaks rises.”
Crude has jumped from $96 last month amid investor concern that growing tensions over Iran’s nuclear program could spark a military conflict that disrupts global crude supplies. Israel has said it may carry out a pre-emptive strike on Iran’s nuclear capabilities while Iran has threatened to halt oil tankers in the Persian Gulf’s Strait of Hormuz.
“The inflammatory rhetoric between the US and Israel and Iran shows no sign of abating,” Citigroup said. Israeli comments that there will be no public debate before a strike promises to keep oil elevated even if the rhetoric calms down, the bank said.
In other energy trading, heating oil rose 2.7 cents to $3.27 per gallon and gasoline futures gained 1.8 cents at $3.34 per gallon. Natural gas slid 0.5 cent at $2.26 per 1,000 cubic feet.