(AFP) – Mar 17, 2008
SINGAPORE (AFP) — Oil soared to new highs near 112 dollars in Asian trading Monday as the US currency slumped to a fresh low against the euro, sparking a rush of funds into commodities including crude, dealers said.
New York's main contract, light sweet crude for April delivery, briefly traded at a fresh all-time high of 111.80 dollars a barrel before easing to 111.40.
The contract closed Friday during floor trading at the New York Mercantile Exchange at 110.21 dollars a barrel.
London's Brent North Sea crude for May delivery was up 1.25 dollars to 107.45. The April contract expired Friday at 107.54.
The latest record-setting mark came as the euro rose to a lifetime peak of 1.5905 dollars while the US currency fell to as low as 95.75 yen, a bottom not seen since September 1995.
The dollar's plunge has triggered a flood of money into commodities such as oil, which are seen as safe-havens amid rising concerns over the US economy and the financial turmoil from a global credit squeeze.
"It really seems to be a case where the continued dollar weakness appears to be the key driver for oil," said Gerard Burg, a minerals and energy economist with National Australia Bank.
"The kind of evidence we are seeing at the moment in the US equity markets is counter-cyclical to the commodity markets."
Dealers said that in the near-term, oil prices were likely to trend higher with no relief seen for the US currency as investors worry about the US financial system following the woes of investment bank Bear Stearns.
"We can continue to expect strong prices for oil and commodities like gold in the near term," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
An emergency rate cut by the US Federal Reserve, made in a rare Sunday announcement, only added to the sense of crisis after the near-collapse of Bear Stearns, analysts said.
The US central bank said it was cutting by a quarter-point to 3.25 percent its primary credit rate, which is offered at the Fed's discount window for institutions "in sound condition."
The ailing greenback has also helped to drive up oil prices because crude is priced in dollars and becomes more affordable for purchasers holding stronger currencies.
Investors view oil futures as a hedge against inflation and the weak dollar.
Societe Generale said in a report Monday that the dollar was "under sustained pressure".
Oil prices have soared by 90 percent over the past year, driven by tight supplies, political concerns in key producer nations and fierce demand for crude from China and India.
Prices have gained about 11 percent in value since the start of 2008, accelerating after the OPEC oil cartel decided in March not to increase output.
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