Oil soars as dollar sinks
Oil is trading just below Thursday's high of almost $US 106 a barrel, helped by a tumbling U.S. dollar.
As the dollar plunges to new lows – currently at 23.83 roubles – hedge funds are buying more crude oil. This drove the price to $US 105.97 during Thursday's trade, eventually closing at $US 105.47, the highest it's been since NYMEX introduced crude tradingback in 1983.
Traders cite a weak dollar, a fall in U.S. inventories and Wednesday's decision by the Organisation of Petroleum Exporting Countries not to increase output.
Oil analysts say although the price is at a record highif it's gone this high, it could still go even higher.
“If we get from $US 100 to $US 105 in two days, we might even get to $US 120. There are a lot of people saying it could go as high as to $US 150. As long as we keep cutting interest rates and as long as the dollar continues to sink, oil has become a new asset class that absorbs a lot of money that's looking for a safe haven to avoid inflation and the devaluation of the dollar. So it's the only game in town,” said Fadel Gheit, Senior Energy Analyst at Oppenheimer New York.
Meanwhile the Russian crude brand Urals is nearing the $US 100-per-barrel mark. On Thursday it closed at $US 99.96. In just one day its price surged by about $US 4.
Analysts told Kommersant newspaper this price for Urals does not mean much to Russian oil companies, because 94% of the revenue above $US 22 goes to the tax authorities.
However, the high Urals price may prompt more discussion at the Ministry of Finance about the reserve fund for Russia's surplus oil revenues.
The President of the European Central Bank said that inflation has seen a series of successive big shocks from oil as well as from food prices.
He did say though he would expect oil prices to decline if leading economies slow down.
“Let me only say a general point. It's clear that if it's confirmed that the global economy is slowing down, it would be a normal feature of the global economy that a number of prices of commodities, including oil, would be up less or even go down. That would be a normal feature of the global economy that would function normally. And that would be a part of the automatic stabilisation at the global level,” commented Jean-Claude Trichet, the President of the European Central Bank.