Crude hits $99/bbl on weak dollar, supply worries

21 November 2007 05:25  [Source: ICIS news]

SINGAPORE (ICIS news)--Oil futures climbed by more than $1/bbl to a new record high in early Asian trade on Wednesday, buoyed by a weak US dollar and concerns over low winter supplies.

At 5:00 GMT on Wednesday, January NYMEX light sweet crude futures were trading at $98.93/bbl, up $0.90/bbl on Tuesday’s close, after earlier hitting an all-time high of $99.29/bbl.

January ICE Brent futures, meanwhile, were trading at $96.35/bbl, up $0.86/bbl on the previous close, after earlier hitting a new record high of $96.53/bbl.

Crude prices have risen by more than 60% since the start of the year.

The weak US dollar, which hit new lows against the euro on Tuesday, prompted market speculators to move funds into the oil market - a move which increased the volume of long positions and drove up prices.

The dollar fell after the US Federal Reserve said economic growth in the US was expected to slow in 2008, which raised expectations of a further interest rate cut.

Meanwhile, fears over a potential tightness in winter supply have risen amid forecasts of colder than normal winter weather in the US northeast.

Analysts predicted that US weekly inventory data, due out later on Wednesday, will reveal a decline in distillate stocks, including heating oil, of around 300,000 bbl. However, crude and gasoline inventories are expected to rise.

With supply worries rising, pressure has been building on the OPEC to increase production ahead of its meeting on 5 December in Abu Dhabi.

In its short-term energy outlook published earlier this month, the US Energy Information Administration (EIA) said that strong demand and OPEC reluctance to raise output would push down stocks held by leading nations to below the five year average by the end of the year.

Crude prices also continue to be supported by Middle East geopolitical tensions generated by the Iranian nuclear issue and the conflict between Kurdish rebels and Turkish forces.

($1 = €0.68)

By: James Dennis
+65 6780 4359

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