March 13, 2008
Oil Prices Surpass $110 A Barrel
Despite Increase In Supply, Skyrocketing Prices May Be Driven By Weakening Dollar
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Many analysts argue that current oil prices can't be justified by the market's underlying supply and demand fundamentals. Yet evidence of weak demand amid growing supplies has not stopped oil prices from rising in the past, particularly when the dollar is falling. (AP Photo/Rob Carr)
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Interactive Gas Prices State-by-state averages, tips to improve mileage and a look at what fuels prices at the pump.
Light, sweet crude for April delivery rose 78 cents to reach $110.70 in early afternoon European electronic trading on the New York Mercantile Exchange. On Wednesday, it set a record trading high of $110.20 a barrel.
In London, Brent crude futures rose 23 cents to $106.50 a barrel on the ICE Futures exchange.
Many analysts believe the dollar's decline is the reason crude futures have surged to new records in 11 of the past 12 sessions, despite the fact that crude supplies have risen 10.2 percent since early January.
The euro has risen as high as $1.5625 in European trading - also a new record - before falling back to $1.5592.
In Asia, the dollar briefly slumped to 99.75 yen, a 12-year low, before creeping back up to 100.27 yen, amid concerns about the flagging U.S. economy.
"The dollar will remain the dominant factor until the Fed meeting next Tuesday but oil will also have to balance with equities under the pressure of more credit hedge funds going bellyup," said Olivier Jakob of Petromatrix in Switzerand, referring to the U.S. Federal Reserve.
The Amsterdam-listed fund Carlyle Capital Corp. was near liquidation after suffering huge losses in its portfolio of residential-mortgage-backed bonds.
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 weak.
"Oil and other commodities have an intrinsic value so that to the extent that the U.S. dollar depreciates, (oil) becomes relatively cheaper in terms of other currencies, such as the euro," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "So you get an adjustment to compensate for that effect."
Oil prices initially fell Wednesday in New York trading after the U.S. Energy Department's Energy Information Administration, or EIA, said crude supplies rose 6.2 million barrels last week, more than three times the 1.6 million barrels forecast by analysts surveyed by Dow Jones Newswires. But buyers quickly returned to the market.
"We did see oil prices take a bit of a hit when the EIA data was released ... but obviously that dent was only temporary," Moore said. "Subsequently, oil prices went up higher again, and I think the weakness of the U.S. dollar was a key part of that."
The EIA also reported that gasoline supplies rose 1.7 million barrels last week, well above the expected 300,000 barrel increase, and distillate supplies dropped 1.2 million barrels, less than the expected 2 million barrel decline.
It was the eighth increase in crude supplies in nine weeks, putting oil inventories back on a growth track after a one-week decline. Meanwhile, forecasters including the Energy Department, the International Energy Agency and OPEC have consistently reduced their demand growth predictions for this year.
Wednesday's EIA report offered more evidence demand is falling: Gasoline consumption fell 0.7 percent last week compared to the same week last year. Normally, gasoline consumption grows about 1.5 percent year-over-year, just to keep pace with population growth.
Many analysts argue that current oil prices can't be justified by the market's underlying supply and demand fundamentals. Yet evidence of weak demand amid growing supplies has not stopped oil prices from rising in the past, particularly when the dollar is falling.
"Some investors are apparently viewing oil and other commodities as providing something of a hedge against U.S. dollar weakness and possibly inflation concerns as well," Moore said.
In other Nymex trading, heating oil futures gained 0.77 cent to $3.0321 a gallon while gasoline prices were down 1.06 cents to $2.7180 a gallon. Natural gas futures added 2.7 cents to $10.038 per 1,000 cubic feet.
©MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
Best-selling author Mitch Albom on his first nonfiction work since "Tuesdays with Morrie."
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See all 25 CommentsWALK..RIDE YOUR BIKES..TAKE THE BUS..
for all you liberals..PEEL THAT ''NO WAR FOR OIL'' BUMPER STICKERS off your SUVS and plaster that on your arse..THEN WALK..
4.00 a gallon is cheap.
Go to Holland and is equal to 8 a gallon and it sold by the litre as well as Europe and other countries!
It''''s been a long time coming and surpriced it took this long to get to 115 a barrel.
Posted by the_snitch
This is not Holland! This is the Arrogant, the Vane, and the Lustful North America. Where Big FAT SUV, and gas GUZZLER Hemi engine trucks is the style. We Americans don''t know the meaning of fuel efficent vehicles and compact car. Haven''t you noticed, even our women folk are fat pig balloons who get stuck on toilets for two years. Americans don''t know the meaning of thin, and non-waste. We are all over-weight fat big pig, vane, greedy gas hogs.
Posted by libsrweak
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Cynical, ironic (from the Left''s point of view), but VERY humorous indeed.
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Posted by demslie at 04:06 PM : Mar 13, 2008
+ report abuse
Yeah and the NINE HUNDRED AND THIRTY FIVE LIES told by Bush were just jokes right? ROFLMAO You nazi''s are really something. I noticed you didn''t address the ISSUE of the falling dollar? Problem there? I mean didn''t the Reich Propaganda Ministry put out a talking point on that today? ROFLMAO You bootlickers are SOOOOOOOOOO simple minded. Sieg Heil Bush
When Clinton took office the average price of gas was $1.06 a gallon, when he left office it was in the $1.20 range. If you are going to quote something get your facts straight. Typical Republican.
Posted by demslie
You seem to have no issue with flat out lieing, do you? Do you think that the majority can''t remember what they payed for gas 10 years ago.
Posted by cresler28
Of course the Democrats lie. If oil had be ten dollars a barrel the price per gallon would have been 50 cents. Gas prices during the Clinton Administration went above 3 dollars a gallon for the first time in history but were steady around 2 dollars.
BERNANKE IS GOING TO PRINT $200BILLION!!!!!!!!!!
HE''S DOING INTEREST RATE CUTS!!!!!!!!!!!!
Why aren''t the media telling the people what''s going on?
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