Crude hits another record as dollar stays under pressure
NEW YORK: Fueled by a continuing weak dollar, crude oil futures surged above $107 Monday, a new inflation-adjusted record and their fifth new high in the last six sessions.
Light, sweet crude for April delivery rose $2.30 to $107.45 a barrel at midday on the New York Mercantile Exchange after earlier setting a new trading record of $107.
The dollar, which has driven the rally from $87 in January, remains a force in the market, though the U.S. currency firmed a bit Monday from lows hit at the end of last week.
Gasoline prices, meanwhile, were poised to set a new record at the pump, having surged to within half a cent of their record high of $3.227 a gallon, or 85 cents a liter.
The average price of a gallon of U.S. gas rose 0.7 cent overnight to $3.222 a gallon, 69 cents higher than one year ago, according to AAA and the Oil Price Information Service. Last May, prices peaked at $3.227 as surging demand and a string of refinery outages raised concerns about supplies.
That record will probably be left behind soon as gas prices accelerate toward levels that could approach $4 a gallon, though most analysts believe prices will peak below that psychologically significant mark. In its last forecast, released last month, the Energy Department said prices would probably peak around $3.40 a gallon this spring; a new forecast is due Tuesday.
There was little in oils price uncertainty to convince analysts that the huge run-up in oil prices had run its course.
“Weve got a Fed meeting on the 18th that could see a sizeable rate cut,” said Brad Samples, an analyst with Summit Energy Services, in Louisville, Kentucky. “So, its not over.”
Many analysts believe speculative investing attracted by the weak dollar is the primary reason why oil has risen so far so fast in recent months. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
Indeed, while the dollar fluctuated against the euro on Monday, many investors believe the dollar is likely to keep falling as the Fed continues to cut rates. Many analysts believe the rise in crude prices is not supported by the markets underlying fundamentals, noting that supplies are generally rising while demand is falling.
Investors “are pushing food and fuel prices to ruinously high levels,” said Peter Beutel, president of the energy risk management firm Cameron Hanover, in a research note.
Investors shrugged off a weekend cooling of tensions in South America, where Venezuela said Sunday that it was restoring full diplomatic ties with Colombia after they were broken off following a cross-border Colombian attack on a leftist rebel camp in Ecuador.
Last week, rebels shut down a Colombian oil pipeline in retaliation for the Colombian raid into Ecuador. Venezuela threatened to slash trade and nationalize Colombian-owned businesses, and Venezuela and Ecuador briefly sent troops to their borders with Colombia.
The potential for conflict involving Venezuela, an OPEC member and major U.S. oil supplier, helped push oil higher last week.
“The Venezuelan production was at risk there,” Samples said.
Other energy futures were mixed Monday. April heating oil futures rose 2.05 cents to $2.9675 a gallon while April gasoline futures rose 0.37 cent to $2.698 a gallon.
April natural gas futures slid 2.6 cents to $9.743 per 1,000 cubic feet.
In London, Brent crude futures rose 95 cents to $103.33 a barrel on the ICE Futures exchange.
