SINGAPORE: Oil simmered down Friday after hitting a record $111.00 per barrel overnight, but analysts said prices remain on the boil due to a sharp fall in the value of the US dollar. New York s main oil futures contract, light sweet crude for delivery in April, was at $109.78 per barrel in Asian trade, down 55 cents from its all-time closing high of $110.33 in New York. In earlier frenzied US trading, the contract had struck $111.00 for the first time. Brent North Sea crude for April delivery was down 62 cents to $106.92 per barrel. It had touched an all-time intra-day high of $107.88 on Thursday. We are seeing only a marginal movement, said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney, noting that prices remained high. Moore said the US dollar s softness was a key factor supporting oil prices at the moment. Crude is priced in dollars and becomes more affordable for purchasers holding stronger currencies. Investors view oil futures as a hedge against inflation and the weak dollar.
A decision by the Organization of Petroleum Exporting Countries (OPEC) to keep production at current levels is also supporting higher oil prices, Moore said.
Dave Ernsberger, Asia oil director at energy intelligence provider Platts, said oil prices could ease ahead of the long Easter weekend next week, but he did not predict a major reversal.
Oil prices could still go beyond the all-time peak of $111.00, he said.
Saudi Foreign Minister Prince Saud al-Faisal said on Thursday that speculators were largely responsible for the price peaks, while some analysts cautioned that the market could be in a price bubble.
The current turbulence on the oil market is due in large part to speculation and has nothing to do with market fundamentals, which are stable, the prince told the Organization of the Islamic Conference summit in Dakar.
Saudi Arabia is a key OPEC member and is the world s biggest oil producer.
Most of the rally in oil of late is not about supply and demand but really about the larger economic condition, said Phil Flynn, a market analyst at Alaron Trading.
Oil is being used as a hedge against the dollar, no more and no less. And at some point, oil will disconnect as rising supply and slowing demand start to fall. Oil is in a bubble. – AFP