Futures firm with $124 barrier in sight
Oil steadied today within sight of a record high near $124 a barrel as the
dollar's rise against the euro reduced the appeal of the commodity as a
hedge against inflation.
Weighing on the price of crude, the euro fell to a two-month low against the
dollar today as a sharp drop in euro zone retail sales raised concern about
the region's economy.
US crude was up 18 cents to $123.71 a barrel by 1018 GMT, close to the record
high of $123.93 reached yesterday. London Brent was up 33 cents to $122.65.
Data released yesterday by the US Energy Information Administration (EIA)
showed a decline last week in distillate inventories - which include diesel
and heating oil - showing an almost 13% year-on-year drop in stocks.
Tight power supplies in China, South Africa, Chile, Argentina and parts of the
Middle East have set off a worldwide boom in demand for diesel for use in
electric generators, adding to robust demand for use in Europe's passenger
vehicle fleet.
But the impact of the drop was cushioned by larger-than-expected increases in
stocks of both crude oil and gasoline.
"What we are seeing today is a market correction, as the market feels
that the price hit earlier was too high for only a fall in distillate
inventories," Tatsuo Kageyama, an analyst at Kanetsu Asset Management,
told Reuters.
Weighing on oil, the euro fell to a two-month low against the dollar today, as
a sharp drop in euro zone retail sales raised worries about downside risks
to the region's economy.
The dollar slipped to a record low against the euro last month, boosting
dollar-denominated commodity prices, but has since recovered by more than 4%
against the European currency.
The weak dollar and Nigerian supply concerns were cited by Iran's Oil Minister
Gholamhossein Nozari for the surge in oil prices to record highs, who added
that if existing conditions continued, it would be possible to see prices
soar to $200.
"If current conditions continue, reaching a period when oil is supplied
at $200 a barrel is not out of reach," Nozari told the official IRNA
news agency.
Traders will be looking at the release later today of US government data for
initial jobless benefit claims at 1230 GMT and wholesale inventories at 1400
GMT for an indication of how the economy is performing.
ExxonMobil lifted force majeure on its crude oil exports from Nigeria
yesterday, ending one of the factors that had helped lift oil above $120 a
barrel.
08 May 2008 05:30 GMT
| last updated:
08 May 2008 11:04 GMT
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