Oil at record high above $ 146


Expectation was high that a combination of a weak U.S. dollar, lower U.S. crude stocks and tension between Israel and major oil producer Iran would push prices to $ 150 before the close of trade, in line with a prediction made last month.

Investment bank Morgan Stanley, one of Wall Street’s biggest energy traders, said on June 6 that crude could reach $ 150 by July 4.

U.S. crude rose $ 2.28 to a high of $ 145.85 a barrel. It trimmed the gain later, trading 50 cents higher at $ 144.07 by 1501GMT, as the dollar recovered after U.S. jobs data and the European Central Bank’s rate decision.

London Brent crude hit an even higher peak of $ 146.69. It was trading $ 1.83 higher at $ 146.09.

"What is more concerning is it is very difficult to know why it is going up. No one really knows the answer," said Colin Morton with Rensburg Fund Management. "It seems to be about momentum now. It’s going up because it is going up."

Saudi Oil Minister Ali Al Naimi was more reluctant to make predictions.

Asked at a conference in Madrid whether oil would hit $ 150, he replied: "If I knew that, I’d be in Las Vegas."

Naimi also said Saudi Arabia would pump more oil if there was demand for it, but that his customers were satisfied and that the market was driven by a range of factors, but not by any lack of supply.

One of those factors is the weakening U.S. dollar.

The currency inched up after U.S. payroll data suggested the job market had not deteriorated as much as many investors had feared.

At the same time, the rate hike by the European Central Bank turned out to be in line with expectation. Earlier in the day, the U.S. currency fell to a two month low against the euro.

A weak U.S. dollar has helped to fuel this year’s rally across dollar-denominated commodities as investors seek to hedge against inflation and falls in other asset classes.

Oil prices, which have been edging higher since the start of the week, gained momentum on Wednesday after U.S. government data showed a sharp fall in oil inventories. Bullishness has been tempered slightly by evidence high oil prices have started to erode demand as U.S. gasoline prices have leapt to more than $ 4 a gallon. But traders were reluctant to sell ahead of the U.S. Independence Day holiday, which marks the peak of the U.S. driving season, particularly in view of heightened tension between Israel and Iran.

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