Oil steady after record of over $101 - Emirates24|7

Oil steady after record of over $101

 

Oil steadied on Thursday after surging to a record over $101 a barrel on a gush of hedge fund inflows and Opec supply concerns, with traders weighing US economic worries against expectations of further Fed rate cuts.


The new front-month US crude for April delivery rose 21 cents to $99.91 by 2.48 GMT. The expired March contract rose for five straight sessions to hit a high of $101.32 on Wednesday before closing at $100.74 a barrel, the highest settlement ever.

Crude oil prices are now hovering near the all-time inflation adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution, the International Energy Agency said.

London Brent rose 3 cents to $98.45 a barrel.

Analysts said funds were rushing into oil and other commodities like gold as a hedge against inflation, drawing in momentum traders and exacerbating price pressures.

"It's almost become self-perpetuating. People are buying because people are buying," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

US oil inventory data due later in the day is likely to show crude oil stocks rose by 2.3 million barrels last week, the sixth build in a row, according to a Reuters poll.

Unusually high gasoline stocks were expected to rise by another 1.1 million barrels while distillates stocks should fall by 1.7 million barrels after a spell of cold weather.

The oil inventory report is due at 15.30 GMT, delayed a day due to Monday's Presidents' Day holiday.

While US economic data painted a gloomy picture for oil demand in the world's biggest consumer, investors appeared more focused on worsening inflation.

The US Consumer Price Index rose faster than expected in January and for the second straight month.

And the US central bank lowered its 2008 economic growth forecast, raising fears the world's biggest economy is heading into stagflation - when growth slows and inflationary pressures persist - but lifting hopes the Federal Reserves would cut rates further to revive the economy.


"That's another reason why oil's been so strong. Markets have been pricing in another interest rate cut. This will weaken the dollar and is bullish for US-dollar denominated commodities," Ritterbusch said.


A host of supply risks also lent support to prices, including US refinery problems, the row between Venezuela and Exxon Mobil and expectations that the Organisation of the Petroleum Exporting Countries will hold output levels steady or even reduce them when they meet next month.


The International Energy Agency wants Opec to keep oil production levels unchanged, at the very least, to rebuild low crude stocks, an agency analyst said on Wednesday.


But several members including Iran have said high prices are due to speculation, not fundamentals, and they see no need for Opec action given healthy inventories. (Reuters)


 

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