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Oil tops $145 ahead of US July 4 holiday
(Agencies)
Updated: 2008-07-04 09:45 LONDON - Oil jumped to record highs above $145 a barrel on Thursday as traders rushed to buy ahead of the long holiday weekend in the world's top consumer to mark US Independence Day.
Expectation was high that a combination of a weak US dollar, lower US crude stocks and tension between Israel and major oil producer Iran would push prices to $150 before the close of trade, in line with a prediction made last month. Investment bank Morgan Stanley, one of Wall Street's biggest energy traders, said on June 6 that crude could reach $150 by July 4. US crude rose $2.28 to a high of $145.85 a barrel. It trimmed the gain later, trading 50 cents higher at $144.07 by 1501 GMT, as the dollar recovered after US jobs data and the European Central Bank's rate decision. London Brent crude hit an even higher peak of $146.69. It was trading $1.83 higher at $146.09. "What is more concerning is it is very difficult to know why it is going up. No one really knows the answer," said Colin Morton with Rensburg Fund Management. "It seems to be about momentum now. It's going up because it is going up." Saudi Oil Minister Ali al-Naimi was more reluctant to make predictions. Asked at a conference in Madrid whether oil would hit $150, he replied: "If I knew that, I'd be in Las Vegas." Range of factors Naimi also said Saudi Arabia would pump more oil if there was demand for it, but that his customers were satisfied and that the market was driven by a range of factors, but not by any lack of supply. One of those factors is the weakening US dollar.
The currency inched up after US payroll data suggested the job market had not deteriorated as much as many investors had feared. At the same time, the rate hike by the European Central Bank turned out to be in line with expectation. Earlier in the day, the US currency fell to a two month low against the euro. A weak US dollar has helped to fuel this year's rally across dollar-denominated commodities as investors seek to hedge against inflation and falls in other asset classes. Oil prices, which have been edging higher since the start of the week, gained momentum on Wednesday after US government data showed a sharp fall in oil inventories. Bullishness has been tempered slightly by evidence high oil prices have started to erode demand as US gasoline prices have leapt to more than $4 a gallon. But traders were reluctant to sell ahead of the US Independence Day holiday, which marks the peak of the US driving season, particularly in view of heightened tension between Israel and Iran. Speculation has mounted that Israel could launch an attack on Iran's nuclear plans, which Tehran has insisted are purely for peaceful purposes. The market is concerned any conflict could disrupt oil shipments from the Gulf through the vital shipping route, the Strait of Hormuz. Roughly 40 percent of the world's seaborne oil passes through the Strait. |
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