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18 April 2024

Oil nears $105 in Asian trade

By Agencies


Oil edged close to 105 dollars a barrel in Asian trade early Thursday as investors fretted over an unexpected drop in US energy stockpiles, dealers said.

Opec's decision to maintain output levels and the dollar's continued weakness were also driving crude higher, they said.

New York's main contract, light sweet crude for April delivery, traded at a new high of $104.95. It closed Wednesday at $104.52.

The surprise fall in US energy stocks and Opec's decision to stick to its current output levels are expected to keep oil prices above the key $100 mark, dealers said.

"The truth of the matter is there is not a lot of supply in the supply chain," said Justin Wilks, director of trading and operations at Global Commodities fund group in Australia.

Regarding prices over $100, Wilks said: "I would suggest that we would have to get used to it."

Prices shot higher in US trading hours Wednesday after the Department of Energy's (DoE) energy stockpiles report showed crude inventories tumbled by 3.1 million barrels last week.

That confounded market expectations for a rise of 2.4 million barrels and was the first weekly drop for a month and a half.

Opec's decision to keep its daily production target at 29.67 million barrels despite pressure from US President George W. Bush to pump more crude was also bolstering prices, dealers said.

The Organisation of the Petroleum Exporting Coutries (OPEC) blamed the high cost of crude on speculative buying as investors sought a haven amid a weak dollar and high inflation.

"The market is well-supplied, with current commercial oil stocks standing above their five-year average," Opec said in a statement following a meeting in Vienna on Wednesday at which the cartel declined to boost production.

It also said it was concerned that the current price "does not reflect market fundamentals (of real supply and demand)." (AFP)