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Oil rockets to new high above $135 on supplies
(Agencies)
Updated: 2008-05-22 11:22 TOKYO - Crude oil soared to a fresh record high above $135 per barrel on Thursday as a surprise drawdown in US crude oil inventories and a weaker dollar prompted heavy fund inflows into the market.
Investment funds flocked into the market based on its strong performance, with key US crude oil having surged more than 20 percent since the start of the month and geopolitical and supply concerns keeping traders reluctant to sell. Recent bearishness towards the dollar added momentum to the oil market, as the dollar's weakness increases the purchasing power of buyers holding other currencies. The front-month July NYMEX crude contract rose to a record high of $135.04 a barrel on the Globex electronic trading platform, up 1.4 percent from the New York settlement. As of 0131 GMT, it was trading up $1.68 or 1.26 percent at $134.85, after settling up $4.19 or 3.3 percent at $133.17 in New York. "The huge draw in crude inventories was surprising. All the focus is on bullish factors. You simply have to follow the trend and buy now," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo. "You really cannot forecast how much further the market will rally now. All I can say is the market will continue to rise," Kageyama said. The US Energy Information Administration said that for the week to May 16 domestic crude stocks fell 5.4 million barrels to 320.4 million barrels, against a forecast for a 600,000-barrel build in a Reuters poll of analysts. US heating oil futures surged to a record high on Thursday, carrying over a bullish trend from the previous day after distillate stocks rose far less than expected last week. Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Globex on Thursday. It settled 13.34 cents or 3.53 percent higher at a record $3.9084 a gallon on Wednesday. Investors have been drawn into oil by a weak US dollar, which has made commodities relatively cheap for holders of other currencies. The dollar fell to a one-month low versus the euro on Wednesday after the Federal Reserve cut its 2008 growth forecast and warned of higher unemployment, reducing prospects of an interest rate hike later this year. The market has been convinced to buy oil amid a series of bullish forecasts, while the outlook for the dollar is weak, traders said. Investment bank Goldman Sachs has said it thinks oil prices will average $141 a barrel in the second half of this year and could top $200 a barrel by 2010. US investor Warren Buffett, the world's richest person, said on Wednesday he expects the dollar to keep falling as policies needed to correct the slide had yet to be implemented. US Energy Secretary Sam Bodman said record oil prices fairly reflect tight supplies and strong global oil demand, and speculators were not at fault for pushing up petroleum costs. |
