7.05 PM Monday, 20 May 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:05 05:29 12:18 15:42 19:02 20:26
20 May 2024

Oil prices steady after spiking to record near $106

By Agencies

Oil prices were steady on Friday after jumping to a trading record near $106 (Dh389.02) a barrel in the previous session as the dollar’s slide to new lows prompted investors to pump more money into commodities.


Analysts believe the steadily weakening dollar is the reason oil prices have jumped to a number of new inflation-adjusted record highs this week. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.


“There are expectations that the dollar will go lower, and that’s driving money into commodities,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “Traders now have this mantra: sell the dollar and buy oil, or buy commodities.”


Light, sweet crude for April delivery fell 3 cents to $105.44 (Dh386.96) a barrel in Asian electronic trading on the New York Mercantile Exchange by mid-afternoon in Singapore.


The contract rose 95 cents Thursday to settle at a record $105.47 (Dh387.10) a barrel after earlier spiking to a trading record of $105.97 (Dh388.91).


Analyst estimates for where oil goes from here vary widely. Some predict an eventual decline to the $65 (Dh238.55) or $70 (Dh256.90) range as supplies continue to grow and demand falls. Others see prices rising as high as $120 (Dh440.40) as investment capital continues to flow into oil.


“We have the speculative funds and investors betting that oil pricing will strengthen. On the other hand, we have the commercial players, who actually ship and use the oil, betting that prices will decline,” Shum said.


“Lately, the noncommercial players are winning and driving oil higher because their money is searching for better returns and oil has performed much better than equities and bonds since the middle of last year,” he said.


Shum said market fundamentals, which have shown increases in crude inventories amid softening demand, do not justify the current price surge, and warned of a sharp correction.


“The strength in oil pricing smells of a bubble ... the oil market might be primed for a pullback,” he said.

“At some point, some event will trigger financial players to exit oil as fast as they’ve got into oil.”


Also supporting prices was a rebel attack on a Colombian oil pipeline that transports 60,000 barrels of oil a day for export markets.


The attack came on Thursday as traders worried about escalating tensions between Colombia and Venezuela over Colombia’s raid into Ecuador. Venezuela threatened to slash trade and nationalise Colombian-owned businesses. Venezuela and Ecuador have sent troops to their borders with Colombia.


All three countries involved in the crisis are oil producers, with Venezuela ranking as one of the world’s top oil producers and a major supplier to the United States.


Heating oil futures slipped 0.68 cent to $2.9665 (Dh10.89) a gallon (3.8 liters) while gasoline prices added 0.4 cent to $2.6572 (Dh9.75) a gallon.


Natural gas futures rose 2.2 cents to $9.764 (Dh35.83) per 1,000 cubic feet. (AP)