Oil futures surpass $90 a barrel

Source: Stock Market Digital

Date :19/10/2007 03:49:53

Oil prices surpassed $90 a barrel for the first time in after-hours trading in New York before slipping back Friday in Asia.

Investors are being drawn to energy futures as a hedge against the weakening U.S. dollar. That, plus worries over tensions between Turkey and Kurdish rebels in northern Iraq, has lifted crude oil prices to new records for five straight days.

Light, sweet crude for November delivery rose to $90.02 a barrel Thursday evening in electronic trading on the New York Mercantile Exchange. By midmorning Friday in Singapore, the contract retreated to $89.54 a barrel.

Weak dollar

While oil prices have risen sharply in recent days, the weak U.S. dollar is seen as somewhat moderating the impact of high oil prices in other currencies. The greenback fell to a new low against the euro Thursday and also sagged against the yen.

"The main way the weak U.S. dollar is actually relevant to oil and possibly other commodities such as gold, is that you may have seen some investment in those commodities as a hedge against U.S. dollar weakness, and that has pushed up their price," said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.

Data released in recent weeks shows speculative buying of oil futures is on the rise. Many analysts believe the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel.

"While oil markets are tight, there is a question as to whether the current price is sustainable," Moore said.

In Thursday's Nymex floor session, the November contract rose $2.07 to a record close of $89.47 a barrel.

On Wednesday, the U.S. Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies are tight. However, crude supplies at the closely watched Nymex delivery point of Cushing, Okla., fell last week, and several reports in recent days have predicted oil supplies will tighten in the fourth quarter.

Consecutive records

Thursday was the fifth day in a row crude prices have set new records. The new record has taken the price of oil nearer, but still below, inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to more than $101 today.

November natural gas futures fell 1.4 cents to settle at $7.360 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose by 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historical standards.

In London, December Brent crude rose $1.47 to settle at $84.60 a barrel on the ICE Futures exchange. December Brent fell back 12 cents in Asian trading Friday.

Nymex gasoline futures dropped 0.21 cent to $2.183 a gallon, while heating oil prices added 0.58 cent to $2.3551 a gallon.

October 19, 2007