Oil Tops $109 A Barrel For First Time
Oil prices topped $109 a barrel for the first time yesterday as investors sought refuge in the weakening dollar.
Light sweet crude for April delivery on the New York Mercantile Exchange surged to $109.72 a barrel before slipping back to $109.34 a barrel by early afternoon in electronic trading in Europe.
Even that level was $1.51 higher than the previous record high set Monday, reflecting oil's seemingly inexorable march towards the psychologically significant $110 a barrel mark.
Crude futures on Monday rose by $2.75 to a settlement record of $107.90 a barrel.
In London, Brent futures followed the lead of benchmark crude, rising 87 cents to trade at $105.03 a barrel.
April heating oil futures rose by 2.11 cents to $2.9945 a gallon while April gasoline futures were basically steady at $2.7220 a gallon.
April natural gas futures added over five cents to $10.075 per 1,000 cubic feet after settling at $10.024 on Monday, the first time a natural gas contract has closed above $10 since January 2006.
Natural gas was following oil higher, but also rising in anticipation of cooler temperatures across the U.S. Midwest and Northeast, analysts said.
Speculation that rising prices for oil and other commodities will offset the falling dollar has driven oil up from $87 a barrel in January.
Oil's latest rise came as the International Energy Agency said crude prices would likely be underpinned by brisk demand in China and other emerging markets.
The dollar slipped as crude climbed, with the euro notching another record high against the U.S. currency, rising to more than a cent to $1.5464 in morning trading in Europe compared to late Monday in New York.
The dollar has fallen to three-year lows against the yen and the head of the European Central Bank expressed concern on Monday about the "disorderly movements" of exchange rates.
"This surge to new records is driven by the speculative and large funds moving money into commodities.
It's primarily a U.S. dollar and inflation play by financial investors," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Oil's growing strength came amid warnings that there were no signs of relief on the immediate horizon.
The Paris-based IEA said on Tuesday that high crude prices continued to chip away at oil consumption in the United States and other developed countries.
In its monthly report, the agency revised down 2008 crude consumption in the U.S., Europe and other developed markets, forecasting a drop of 190,000 barrels a day to 49.3 million barrels a day.
In past years, falling demand in rich countries delivered some relief from high oil prices.