Oil rises to record on weakening dollar

Crude oil surged more than $10 a barrel to a record as the dollar weakened after the U.S. unemployment rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month.

Oil may ``spike'' because ``Asia is taking an unprecedented share'' of Middle East exports, Morgan Stanley analyst Ole Slorer wrote. The dollar weakened against the euro after unemployment rose to 5.5 percent, signaling the Federal Reserve may be reluctant to increase interest rates. Oil also rose after an Israeli minister said an attack on Iran may be necessary.

Oil is ``being used as a hedge by speculative buyers for the weakened dollar,'' said Gary Adams, vice chairman of oil and gas consulting at Deloitte & Touche LLP in Houston. ``We are seeing that the price will continue to go up as investors look for alternatives.''

Crude oil for July delivery rose $10.75, or 8.4 percent, to settle at $138.54 a barrel at 2:48 p.m. on the New York Mercantile Exchange. Today's increase was the biggest gain in dollar terms ever and the largest on a percentage basis since June 1996. Oil rose $11.33 to an all-time high $139.12 a barrel during trading.

Today's rise was bigger than the entire price of oil on Dec. 10, 1998, when crude traded at $10.72 a barrel. Oil has more than doubled in the past year.

``This is all just a plain old stampede,'' Tim Evans, an energy analyst for Citi Futures Perspective in New York, said in an e-mail. ``The sellers have basically pulled their orders so it doesn't take much incremental buying to push prices higher.''

Record Gasoline

Gasoline for July delivery rose 21.35 cents, or 6.4 percent, to $3.548 a gallon in New York after reaching a record $3.565. Regular gasoline at the pump fell 0.3 cent to an average $3.986 a gallon after touching a record yesterday, AAA, the biggest U.S. motoring organization, said today on its Web site.

Shaul Mofaz, Israel's transportation minister and a contender for the post of prime minister, told the Yediot Ahronot daily newspaper that Israel will have to attack Iran if it doesn't abandon its nuclear-development program.

``The Iranian risk premium, which had left the market for some time, is likely to return and hover over the market in the next few weeks,'' said Antoine Halff, head of energy research at Newedge USA LLC in New York. ``The knee-jerk reaction to the comments by Mofaz will wear off quickly because Israel would not broadcast its intention in this fashion.''

Brent crude oil for July settlement rose $10.15, or 8 percent, to $137.69 a barrel on London's ICE Futures Europe exchange, a record close, after reaching an all-time high of $138.12 a barrel.

With Asia taking an ``unprecedented'' share of Middle East oil, U.S. benchmark West Texas Intermediate crude oil may reach $150 a barrel by July 4, Morgan Stanley's Slorer said in his report.

Oil Forecast

BNP Paribas SA, France's biggest bank, boosted its 2008 oil outlook by 19 percent to $124 on climbing Asian demand for diesel fuel and kerosene. Last month, Goldman Sachs Group Inc. raised its New York crude-oil price forecast for the second half of this year by 32 percent.

The market ``is underpinned by demand, which is totally different than 1973 and 1979'' when supply cuts caused prices to surge, said Ray Carbone, president of Paramount Options Inc. in New York. Oil's rise is linked to ``supply and demand. Nobody wants to admit it. Too bad.''

A decline in oil prices earlier in the week came after Congress held hearings on possible energy price manipulation, and billionaire investor George Soros said an oil price ``bubble'' is working with fundamentals in the market that may lead to a recession.

Prices rose yesterday after European Central Bank President Jean-Claude Trichet's comment that the bank may raise interest rates next month caused the dollar to fall against the euro.

Weaker Dollar

Oil has surged to records this year partly because investors have turned to commodities as a hedge against the falling dollar.

The dollar weakened further today after the Labor Department said the U.S. jobless rate increased by half a point to 5.5 percent, the biggest increase since 1986 and higher than every forecast in a Bloomberg News survey.

Rising unemployment ``is going to lead to a drop in the dollar and higher commodity prices,'' said Phil Flynn, a commodities trader for Chicago-based Alaron Trading. The Fed will be ``less aggressive in raising interest rates.''

The dollar decreased 1 percent to $1.575 per euro at 1:52 p.m. in New York, from $1.5593 yesterday.

Chevron in Nigeria

Workers at Chevron Corp. in Nigeria may strike, a union official said. Chevron has yet to respond to worker demands that the head of the Nigerian unit be replaced, said Ethelbert Uka, treasurer of the Petroleum and Natural Gas Senior Staff Association of Nigeria. Daily production of about 450,000 barrels of crude oil may be threatened, the Lagos-based newspaper Vanguard reported earlier.

A Chevron spokesman said the company is trying to open negotiations with the workers.

Nymex trading in crude oil, heating oil and gasoline on the Globex electronic system was ``briefly halted'' and resumed around 1:15 p.m. New York time because heating oil reached its limit move for the session, said Brenda Guzman, a spokeswoman for the exchange.

The limits, which govern maximum price moves, up or down, were doubled for the remainder of the electronic session, she said. Crude oil's limit rose to $20, natural gas to $6 and heating oil and gasoline rose to 50 cents.

/Bloomberg/

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Oil drops to $123 a barrel

Oil on Wednesday fell below $124 a barrel to its lowest level in nearly three weeks after a fuel price rise in India, which is expected to curb demand.

Wednesday's losses added to a more than $3 slide on Tuesday when the US Federal Reserve warned the weakness of the US currency threatened to stoke inflation.

US crude fell to as low as $123.15 a barrel, the lowest since mid-May. It was trading 85 cents lower at $123.46 a barrel by 0939 GMT. London's Brent crude was trading $1.26 lower at $123.32.

Dollar weakness, which makes dollar-denominated commodities relatively cheap, had been a major factor in oil's rise to a record above $135 a barrel in May.

The high prices have begun to erode demand and have made the cost of subsidies paid out by governments in emerging economies very hard to bear.

India raised its petrol and diesel prices by about 10% on Wednesday, the biggest increase in years.

Other Asian countries have already cut or are considering reducing subsidies, with potentially major implications for demand.

If demand in Indonesia, Taiwan, Thailand, Malaysia and India fell by 5%, that would lower daily crude use by more than 310,000 barrels, the equivalent of two North Sea oil fields' output, said Addison Armstrong of Tradition Energy.

Wednesday's sharp sell-off followed strong selling on Tuesday when US Federal Reserve Chairman Ben Bernanke's warning sent the dollar higher and pushed oil and other commodities lower.

"This could signal the end of the surge in dollar-based commodities which have attracted buyers who see it as a hedge against inflation," Robert Laughlin with MF Global said in a research note.

The oil markets could take further direction from the latest US data on supply and demand scheduled for release at 1430 GMT on Wednesday.

Analysts polled by newswire Reuters expected an 800,000-barrel rise in US crude stocks, a 1.4 million barrels increase in distillates and a 400,000-barrel rise in gasoline inventories.

(Reuters)

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The first ‘Malaysia-UAE Palm Oil Trade Fair & Seminar’

Iffco (International Foodstuffs Company), one of the leading consumer products manufacturers in the UAE, will participation as the platinum sponsor at the first ‘Malaysia-UAE Palm Oil Trade Fair & Seminar’ (Pots).

The event is being held on May 26 and 27, 2008, at the Grand Hyatt Hotel in Dubai.

The company’s presence is aimed at leveraging the attendance of leading oils and fats marketers, traders, economists, government officials and industry professionals from the private sector at the event, to gain significant exposure for its wide range of consumer brands.

“The booming palm oil industry in the region poses outstanding opportunities for the entire regional market, and our participation at the first ‘Malaysia-UAE Palm Oil Trade Fair & Seminar’ speaks not only of our keenness to maximise the rising business prospects, but more so of our strong support for the further growth of this high potential trade,” said managing director of Iffco oils and fats Mr. Rizwan Ahmed.

Established in 1975, Iffco is a UAE-based organisation that manufactures and markets a wide range of fast-moving consumer and industrial products to 84 countries worldwide.

Leveraging the UAE’s unique logistical and free trade benefits, the company has successfully built strong brands in the oils and fats, flour, ice cream, biscuits, processed meat, snacks, culinary, chocolate and beverages categories, such as Hayat, Noor, Rahma, London Dairy, Tiffany, Igloo and Al Baker.

At present, Iffco maintains 6500 associates with modern manufacturing facilities in Sharjah, Dubai, Al-Ain (Abu Dhabi), Egypt, Malaysia, Pakistan, and Tunisia to support its operations.

Under the theme ‘Exceeding Expectations, Enriching Partnerships’, the event will bring together oils and fats marketers, traders, economists, government officials and industry professionals from the private sector.

In addition, seminars within the event have been designed to encourage discussions on the prospects in the Gulf and to provide networking opportunities for the attendees, with visitors gaining first hand exposure to the latest palm oil products and services from Malaysia via the trade exhibition booths.
/TradeArabia News Service/

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Oil hits high above $135

Oil galloped to a high above $135 on Thursday, extending this month's near 20% rally after a sharp drop in US crude stocks and the weakening US dollar triggered short covering by investors.

The climb in prices, which have marked new record highs in 10 of their last 14 sessions, has set off alarm bells around the world, although Opec has maintained that the market remains well supplied with crude and that prices are beyond its control.

The US July crude contract extended Wednesday's more than $4 surge to reach a high of $135.04 early on Thursday. By 0333 GMT it was trading up $1.41 or 1% at $134.58 a barrel, taking gains so far this year to over 40%.

"Prices are going in one direction. They are up all the way," said Gerard Rigby of Fuel First Consulting in Sydney. "The primary mover is the fall in the US oil stocks, and this started a series of short covering."

US crude stocks fell 5.4 million barrels to 320.4 million barrels last week, counter to expectations of a small rise in inventories, intensifying concerns about supplies in the world's biggest consumer just ahead of the start of summer.

The drop was caused by a fall in imports to their lowest in five weeks and a pick-up in demand from refineries, the Energy Information Administration said.

US gasoline supplies fell 800,000 barrels against a 700,000-barrel build forecast, while stocks of distillates - which has been one of the market's biggest driver this month - rose 700,000 barrels but were 12% below last year.

Heating oil for June delivery reached a fresh record high of $3.9704 a gallon on Thursday, having climbed nearly 25% since the start of this month.

"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.

Signals from China, the world's second-biggest consumer, were mixed, with April implied oil demand rising by only 3.7% as refiners cut back domestic runs and imported diesel and gasoline instead, taking advantage of a tax break.

While the shift has curbed demand for imported crude, it has driven fuel imports to record highs as firms start to stockpile ahead of the Olympics.

FUNDS BUYING

Several analysts said the latest step higher in prices had come after companies or traders who sold the market short scrambled to buy back their positions.

Forward oil prices out to 2015 have risen even more than prompt front-month prices since the start of the year.

"The surge in long-dated futures...seems to betray financial distress: that of hedged producers facing rising margin calls and trying to get out of their short positions, only to find themselves squeezed," said Newedge analyst Antoine Halff.

Recent bearishness towards the dollar added momentum to the oil market. The US dollar was pinned at one-month lows against the euro after the Federal Reserve cut its 2008 growth forecasts.

In minutes released on Wednesday, the Fed also said it was concerned about inflation, indicating it was unlikely to cut rates further.

The market has been convinced to buy oil amid a series of bullish forecasts, while the outlook for the dollar is weak.

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.

/Reuters/

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Oil charges towards $130

Oil rose to a new record near $130 a barrel on Tuesday, driven by yet more bullish price forecasts from investment banks and influential US oil investor T. Boone Pickens.

The market was also spurred by tight supplies of refined products, especially diesel ahead of the US driving season and amid strong Chinese demand, besides a weak dollar.

US light crude's June contract, which expires later on Tuesday, rose to an all-time high of $129.58 a barrel and by 1529 GMT was trading was $2.03 higher at $129.08.

London Brent crude was up $2.15 at $127.21.

ICE gas oil futures, which includes diesel, rallied more than 2.5% to a record of $1,238.75 a tonne.

"The middle distillates market remains a very strong performer on a global scale, that market is very tight and is performing well," said Eric Wittenauer at Wachovia.

The market drew fresh impetus after Pickens said he expected oil prices to reach $150 a barrel this year.

Investment banks Societe Generale and Credit Suisse raised their oil price forecasts for 2008 by $14 to $115 a barrel and by $29 to $120 respectively.

Already, last week, the most active investment bank in the energy markets Goldman Sachs had helped to push oil to a record above $127 a barrel when it predicted oil prices would average $141 in the second half of this year.

Away from the headline-grabbing forecasts, analysts say oil markets have been underpinned by tight fundamentals, especially for refined products.

Tight supplies have come under increasing strain following last week's earthquake in China, which disrupted natural gas supplies and increased demand for diesel to be used in electric generators.

For the latest data on the supply-demand balance, markets are awaiting US inventory data for release on Wednesday.

It is expected to show a rise in US distillate stocks, as well as small increases in gasoline and overall crude stocks, according to a Reuters poll of analysts.

That might not be enough to calm prices, which have also been driven higher by a weak US currency that makes dollar-denominated commodities relatively cheap for investors.

The US dollar fell on Tuesday after US inflation data added to concerns about the economy's strength and raised doubts about whether the Federal Reserve will be able to raise interest rates this year.

"Slackening US demand is being offset by brisk offtake in Asian countries, and to a lesser extent in Europe, where the stronger euro is cushioning the price increases," said Edward Meir at MF Global.

"All this suggests that the overall crude picture remains very much unchanged, leaving the market free to push higher on the back of receptive fund money," he added. (Reuters)

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Oil over $126, new peak for 5th straight day

Oil prices leapt to a new peak of more than $126 a barrel on Friday, hitting a record for the fifth straight session, in a market given an additional spur by tight supplies of diesel.

U.S. crude for June delivery rose $1.87 to $125.56 by 1335 GMT, off a record high of $126.20 a barrel. London Brent crude rose $2.81 to $125.65 per barrel.

"I'm not particularly surprised by the speed of the rise in crude. There are many market bulls hoping for prices to rise heading into the summer," said Tetsu Emori, fund manager at Astmax Co Ltd in Tokyo.

Gas oil futures, the benchmark for European heating oil and diesel contract, surged to a new record high on Friday, driven by worries about tight global diesel supplies.

"Lingering geopolitical fears and high heating oil prices are helping the market, but the speed of the rise is too fast," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

Gains in U.S. crude picked up momentum after distillate stocks in the United States, notably diesel, fell.

The U.S. government said on Wednesday domestic distillate stocks, which include heating oil and diesel, fell by 100,000 barrels last week, to 105.7 million barrels, against forecasts for an 800,000-barrel rise.

The tightness in distillates was also highlighted after Royal Dutch Shell looked set to shut its second-largest crude distillation unit and two secondary units at its Singapore plant next month for routine maintenance.

Strength in middle distillates has been aggravated by growing demand for transport fuel in Europe and power demand in emerging economies where shortages of alternate fuels have set off a boom in demand for diesel for use in electric generators.

Oil's relentless rise has once again turned the spotlight on Organization of the Petroleum Exporting Countries (OPEC), which has for months resisted demands for more oil to try to tame prices.

On Friday, an OPEC source said the exporters' group might consider whether to boost output before its next scheduled meeting should crude oil prices keep rising.

"If the price keeps going up, OPEC may consult on an increase in production before it meets in September. In my view, any increase would have to be more than 500,000 barrels per day to have an impact on the price," the source told Reuters.

OPEC's Secretary-general Abdullah al-Badri said on Thursday world oil markets have enough supply now, but OPEC was willing to pump more if needed to keep pace with demand. /Reuters/

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Oil price reaches new record above 120 dollars

World oil reached a new record price above 120 dollars a barrel on Tuesday as concerns over the United States economy eased, analysts said.

New York's main oil futures contract, light sweet crude for June delivery, reached an all-time high in electronic trade of 120.23 dollars a barrel, breaking the last record of 120.20 dollars reached during intraday trade on Monday.

After breaking the symbolic 120-dollar ceiling for the first time, the contract was trading on Tuesday in Asia at 120.15 dollars a barrel against a record closing price of 119.97 dollars reached Monday on the New York Mercantile Exchange.

In London on Monday, Brent North Sea crude for June delivery hit an intraday record high of 118.58 dollars before settling up 3.43 dollars at a record 117.99 dollars.

Trading volume in London was light as Britain marked a bank holiday.

Oil futures prices on both sides of the Atlantic have nearly doubled in a year.

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Oil rises to yet another record

Oil prices in London and New York have hit fresh record highs on the risk of supply disruptions and signs that Opec is unwilling to raise output further.

US light, sweet crude hit a record high of $117.40 a barrel, while of Brent crude peaked at $114.65 a barrel.

The impending closure of a large oil refinery in Scotland, ahead of strike by workers, and its potential impact on North Sea supplies worried traders.

The International Energy Agency (IEA) reiterated that prices were too high.

It said the recent surge in prices, driven by supply concerns and the weak dollar, was making life particularly painful for developing nations that do not produce their own oil.

Pipeline attacks

US light, sweet crude passed the $117-a-barrel mark on Monday before easing slightly to $116.96. Brent crude also fell back slightly to $114.20 after reaching its latest historic peak.

A range of factors including the uncertain situation at Grangemouth - one of the largest refineries in the UK - and fresh attacks by militants on pipelines in Nigeria spurred prices on.

A Nigerian militant group claimed it had carried out two attacks on oil pipelines in the south of the country.

Royal Dutch Shell said on Monday that previous attacks on a pipeline in Nigeria last week would lead to a drop in production of about 169,000 barrels per day for shipments in April and May.

Opec stance

Comments by Opec's president Chakib Khelil that the producers' body would not be prepared to raise quotas to try and curb the latest price spike also added momentum.

"Opec's assertion that an increase in its oil production will not help to bring down prices should be put to the test," the Centre for Global Energy Studies said.

Although concerned about current price levels, the IEA predicts prices will fall as the slowing of industrialised economies reduces demand for oil.

It predicts world oil demand will slow by an average of 300,000 barrels per day this year, primarily as a result of the economic slowdown in the US.

Nobuo Tanaka, the IEA's head, did not repeat his call to oil producing countries to increase production to try bring prices down from their record levels.

"If oil-producing countries were to maintain their current level of production, inventories would be replenished, " he said.

"That will lead to better-balanced fundamentals, assuming there are no unforeseen geopolitical events, leakages, accidents, hazardous weather or port strikes." (BBC News)

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Oil hits fresh all-time record

Oil advanced to all-time peaks on Tuesday as investors sought to hedge against a battered dollar.

US crude rose 18 cents to $111.94 a barrel at 0819 GMT, after touching a record high of $112.48 earlier in the session.

Oil is up 17% from the start of the year and is averaging near $100.

London Brent crude climbed 28 cents to $110.12, after reaching a lifetime peak of $110.45 in Tuesday's trading.

"The energy markets seem to be completely wrapped up in the dollar's near term prospects," said MF Global Energy.

The dollar held near record lows versus the euro on Tuesday in generally cautious trading ahead of US economic data and first-quarter earnings results from corporate heavyweights this week.

A weak dollar tends to raise prices for commodities denominated in that currency by boosting non-US spending power and by attracting investors seeking an inflation hedge.

Dealers said oil's climb to fresh record highs has triggered even more buying from speculators.

Tetsu Emori, fund manager at Astmax Company said prices had risen due to automatically placed buying orders once the previous record had been breached. Emori sees the next resistance target at $115.00 a barrel.

Mexico - one of the top exporters to the US market - kept its three main crude oil exporting ports in the Gulf of Mexico shut on Monday due to bad weather.

Those three ports ship about 80% of Mexico's crude exports. A smaller port in the Pacific was also shut, the Mexican government said.

"The system is so tight that any supply problems cause real concern," said Robert Nunan of Mitsubishi Corporation in Tokyo.

"We just don't have the big cushion any more that we used to have, so it's much easier for money to come in and prop up prices now," he added.

US gasoline futures hitting fresh highs on Monday also helped prices. They rose as the US gears up for the summer driving season, when demand traditionally peaks.

US crude oil inventories figures are due on Wednesday.

They likely rebounded last week after a surprise drawdown the week before, with an increase in imports lifting supply, according to a preliminary poll of eight industry analysts by newswire (Reuters).

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Oil edges up to $109

Oil prices rebounded on Wednesday, edging closer to $109, as concerns over a decline in gasoline stocks ahead of the U.S. driving season helped keep the market on the boil.

U.S. crude futures inched up 11 cents to $108.61 a barrel by 0710 GMT after the market fell on Tuesday amid profit-taking and the dollar’s strength. London Brent crude was up 11 cents at $106.45.

“The dollar strengthened overnight, but it is still relatively weak to the yen and the euro, and with further interest rate cuts expected, we should see more fund money coming into commodities,” said Robert Nunan of Mitsubishi Corp in Tokyo.

The dollar briefly rose higher against the yen and euro on Wednesday, supported by reports that Citigroup Inc was close to a sale of leveraged loans and bonds to a group of private equity firms.

A weak dollar tends to raise prices for commodities denominated in the currency by boosting non-U.S. spending power and by attracting investors seeking an inflation hedge. A stronger dollar can push commodities prices down.

The Energy Information Administration said on Tuesday that despite softening demand, the world oil market would remain tight this year as production increases from both the Organization of the Petroleum Exporting Countries and non-OPEC countries will likely fall short of projections.

For the first time, it raised its full-year forecast for U.S. light crude to more than $100 a barrel and said a slowing U.S. economy would not be enough to check soaring oil demand.

“Global inventory levels are still at a comfortable level. I think the bigger concern for the market should be if non-OPEC crude oil producers can sustain production levels in the long term,” Nunan said.

An expanded Reuters poll on U.S. inventory data due out later in the day showed an average forecast for a 1.4 million-barrel decline in distillate stocks and a 2.5 million-barrel drop in gasoline stocks

Concerns over diesel supply, particularly with strong demand in Europe and Asia saw London’s gas oil futures closely related to diesel, hit a new peak of $1,017 a tonne on Tuesday before easing to $1,007.

OPEC president Chakib Khelil reiterated on Tuesday that high oil prices were not caused by a shortage of crude and he saw no need for OPEC to pump more. (Reuters)

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Record oil divorced from fundamentals - OPEC delegate

The weak dollar and the flow of investment money into commodities have pushed oil prices to a fresh record so more pumping from OPEC would have done little to stop the surge, a senior OPEC delegate said on Sunday.

The Organization of the Petroleum Exporting Countries (OPEC) left its output steady at a meeting earlier this month despite calls from consuming countries for more oil to halt the record rally. The price hit a fresh peak of $111 a barrel on Thursday. (Reuters)

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Oil sets record high for fifth day

Oil rose to a record high for the fifth day in a row on Tuesday, boosted by investor flows into oil and other commodities partly to hedge against inflation and the weak dollar.
U.S. light crude for April delivery was up 85 cents at $108.75 a barrel by 1048 GMT, after touching a record $109.20 a barrel.

London Brent crude was up 90 cents at $105.06, after touching a record high of $105.40.

“Concerns about inflation are very strong. Hedge funds are selling stocks and buying commodities, especially oil and gold, because the U.S. dollar is weakening,” said Takeda Makoto, an analyst at Bansei Securities.

The U.S. dollar steadied on Tuesday, but has been at record lows in anticipation of more interest cuts by the Federal Reserve to boost the flagging economy in the United States, the world’s top energy consumer.

Prices had dipped slightly after the International Energy Agency said world oil demand would be less than expected this year because of slower economic growth in industrialised countries and record prices.

”There’s quite a big downward revision to demand in industrialised countries,” said Lawrence Eagles, head of the oil industry and markets division at the IEA, which advises 27 industrialised countries..

Oil has set a string of record highs as a bullish long-term supply outlook for oil and other commodities has continued to suck in investment flows looking for alternatives to equities and bonds that are overshadowed by the credit market crises and fears of a U.S. slowdown.

“Looking at the big picture, we believe that the recent price surges in the commodity sector have been for the most part triggered by large capital inflows from institutional investors, hedge funds above all,” said fund manager Tiberius Asset Management in a research note.

Goldman Sachs warned oil was at risk from substantial fund liquidation due to cyclical fundamental weaknesses in the next few months, but the investment bank remains constructive on energy for the long-term.

“We believe that the combination of low economic growth in the United States and high oil price inflation will have its strongest impact on demand in the first half of the year,” the bank said in a research note.

The latest update on fuel supplies in the United States, due on Wednesday, is forecast to show a 1.9 million barrel rise in crude oil inventories last week, according to a preliminary Reuters poll.

Analysts also expected a 1.9 million barrel decline in distillate stocks. Gasoline stocks were expected to have fallen 500,000 barrels, which would be the first dip in 18 weeks. (Reuters)

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U.A.E. task force to study dirham's peg to dollar

The United Arab Emirates' decision to study a possible depegging of its currency from the tumbling U.S. dollar might pressure other countries in the Middle East to follow suit.
The central bank of the U.A.E. has set up a committee to study a possible depegging of the dirham from the greenback, according to a report by Zawya Dow Jones on Monday. This committee will help coordinate any delinking of the dirham and is expected to report its finding at the end of the year, the report said.

"This pegging system is undermined by the unsustainable combination of falling dollar and rising oil," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets US.

"As long as the two go together, the GCC countries will find no choice but to reconsider their currency regimes," Laidi said. "The most likely outcome is to move toward a basket of currencies."

Crude-oil futures soared more than $3 a barrel on Monday to surpass $108 for the first time, before closing above $107 a barrel as the dollar remained weak against other currencies. See Futures Movers.

The Gulf Cooperation Council, or GCC, aims to strengthen economic cooperation in the world's main oil-producing region.

Five GCC members -- Saudi Arabia, the U.A.E., Qatar, Oman and Bahrain -- peg their currencies to the dollar, setting an official reference rate at which central banks buy and sell.

Last May, Kuwait abandoned its peg and now links to a currency basket that includes the euro, the Japanese yen and Britain's pound sterling in addition to the dollar.

"This is something that is not surprising at all," said Kathy Lien, chief strategist at Forex Capital Markets LLC, about the U.A.E.'s decision to study a possible depegging of its currency from the dollar.

"Overall, this is something that will take a few months to occur at the soonest," Lien said. "If it occurs, it will put further pressure on the U.S. dollar, because it's a further threat to the dollar's reserve status."

The eroding value of the country's exports and soaring inflation are among the main reasons why the U.A.E. is looking into depegging, Lien said.

The move by the U.A.E. comes at a time when the Organization of Petroleum Exporting Countries is considering alternatives to pricing oil in dollars. Saudi Arabia, a major player in OPEC, has 25% of the world's proven petroleum reserves.

"This will definitely pressure the Saudi Arabian monetary authority into heeding the increased calls by the public to reconsider the dollar peg," Laidi said. Pegging these countries' currencies to a continuously falling currency exacerbates the burden of the falling purchasing power on the public, he said.

"They [GCC countries] can't continue to follow the monetary policy of a country that's cutting rates when they are facing record inflation," Laidi said. (MarketWatch)

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Oil hits new lifetime high as dollar continues fall

Oil prices hit a new record high on Friday as a weak dollar outweighed concerns of a recession in the US that had been triggered by an unexpected drop in US jobs data earlier in the day.

US light crude for April delivery rose $1.02 to an all-time high of $106.49 a barrel. It then eased to stand at $106.26 at 1639 GMT. London Brent crude was up $1 at $103.61.

News of the jobs data had led to a fall of more than $1 in crude but analysts said the oil market had recently shrugged off bearish US economic data, seeing it leading to interest rate cuts and weakness in the dollar, which in turn has led to higher oil prices.

"The logic of the last few weeks has been to ignore US fundamentals," said Mike Wittner, global head of oil research at Societe Generale.

The dollar slid to new record lows on Friday against the euro and the Swiss franc.

A steady decline in the US dollar has been a factor pushing prices higher, along with fund flows into commodity markets, as investors seek a hedge against inflation.

Oil prices jumped this week after a surprise fall in crude stocks in top oil consumer the United States and after Opec decided against changing output policy at its meeting in Vienna, despite consumers' calls to pump more oil.

The oil exporters' group, which pumps more than a third of the world's oil, has long argued high oil prices do not reflect oil market fundamentals and are being driven by speculation.

Influential Saudi Oil Minister Ali Al-Naimi reiterated the view in remarks published on Friday, saying speculation was behind triple-digit oil and made it impossible for any organisation to control price movements.

"Today there is no link between oil [market] fundamentals and prices," he told Moroccan newspaper Asharq Al-Awast.

"The duty of oil exporters is to make sure that fundamentals are healthy," said Naimi. "If these fundamentals were stable and fulfil market needs, then there is no need to raise or decrease production," he added.

Opec's argument that there is enough oil has been backed by steadily rising crude inventories in the US, but a US government report released after the group's meeting on Wednesday showed crude stocks fell by 3.1 million barrels last week, against analysts' forecasts for an increase.

Opec will next meet in September, although ministers could confer informally at a conference between consumers and producers in Rome on April 20-22.

"Leaving things so open ended gives me and others a clear impression that the cartel is prepared to let prices run away for the time being. Perhaps they feel the weakness in the dollar would offset any rise in price," said Rob Laughlin at MF Global.

Tensions between Opec member Venezuela, a top oil exporter to the US, and neighbour Colombia, have also underpinned oil prices.

Venezuela deployed forces toward the Colombian border on Wednesday, after Colombia last weekend launched a raid against rebels inside Opec member Ecuador. (Reuters)

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New oil storage terminal in Jebel Ali

A world class oil products storage facility will be built at Techno Park in Dubai to provide an initial capacity of 570,000 cubi metre, according to framework agreement signed by Dubai Multi Commodities Centre (DMCC), Star Energy Resources and Tropicana Trading DMCC.

The facility which will involve an estimated investment cost of around $200 will store a wide range of oil products, including gasoline, gasoil/diesel, jet fuel and fuel oil, as well as offering complementary services such as blending. Located within easy distance of the upcoming Dubai World Central - Al Maktoum International Airport, the storage infrastructure facility is expected to service the new airport via a pipeline directly linking the two facilities.

Two new oil tanker berths will also be built at the western breakwater of Jebel Ali port for easy supplier access, with the capacity to accommodate tankers of up to 80,000 tons.

The Final Investment Decision for go ahead of the project will be subject to positive results from a Front End Engineering and Design Study, which will be completed within six months time.

'Ensuring adequate oil storage facilities is crucial for enhancing Dubai's role as the Middle East's leading oil products trading hub and for accommodating the rapid growth of Dubai's own oil products demand, particularly its need to support a burgeoning civil aviation sector,' said DMCC Executive Chairman Ahmed Bin Sulayem.
(WAM)

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Oil sets new record above $102 a barrel

Oil yesterday powered to a new record above $102 a barrel, closing in on its inflation-adjusted lifetime peak, as an ailing dollar on worsening US economic data triggered a surge across commodities markets.

US crude stood 15 cents higher at $101.03 a barrel by 1300GMT, off its new record high of $102.08 and its 1980 inflation-adjusted peak of $102.53.

London Brent crude climbed 16 cents to $99.63 a barrel, after earlier hitting a record of $100.30.

The dollar slumped to an all-time low against the euro as well as a basket of major currencies after data from the United States highlighted a gloomy outlook for the US economy, raising the spectre of more rate cuts.

A weak dollar can trigger commodities buying as investors seek to preserve their nominal value in other currencies.

The price of oil has risen nearly 66 per cent in the past year in US dollar terms, whereas in terms of euros, the rise has only been around 47 per cent.

Analysts and investors also said that the US was seeing a sharp increase in inflation, after data showed that producer prices rose one per cent in January and by 7.4 per cent on an annual basis, the biggest 12-month gain in more than 26 years.

“In this climate, therefore, people tend to buy real assets like oil and gold,” said Colin Morton, investment director at Rensburg Fund Managers.

Stagflation: Edward Meir at MF Global added the economic backdrop in the US now was similar to the stagflation of the late 1970’s, which saw rising inflation and low growth.

“In this type of environment, commodities do quite well, since participants turn to hard assets to protect themselves against eroding purchasing power,” he said.

Barclays Capital raised its average oil price forecast for 2008 to $97.7 a barrel from $87.4 previously. Oil has averaged around $93.66 so far this year, up from $72.30 in 2007.

Most commodities markets pushed higher yesterday with gold hitting a new record high, and copper, aluminium and silver also hovering near multi-year peaks, underscoring their attraction to investors as a hedge against the dollar and an alternative to other financial markets.

Oil has also lately been supported by growing winter fuel demand in the United States and Europe amid falling temperatures, and indications from Opec that the exporter group will not increase production at its meeting next week.

“I think Opec will probably leave things as they are,” said Tom Nelson, analyst at Guinness Atkinson Funds.

On Tuesday, Opec’s president said members would agree not to raise production, in part because of fears of a demand slowdown.

In the United States, crude oil supplies are forecast to have risen last week by 2.5 million barrels, the seventh increase in a row, as refineries undergoing maintenance have built up stocks.

A Reuters poll of industry analysts predicted US distillates stocks, including heating oil and diesel, would maintain their seasonal decline, down 2.1 million barrels, due to cold temperatures and a dip in production and imports. (Reuters)

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Dubai Mercantile Exchange plans new crude oil derivatives contracts

The Dubai Mercantile Exchange plans to launch two new crude oil derivatives contracts in the second quarter in an attempt to build further trading interest on Wall Street.

The new Brent and Oman crude oil futures contracts will be financially-settled. They will allow traders to play the price difference between the high-quality, light-sweet Brent oil and the lower-quality, heavy-sour Oman oil.

DME’s current Oman crude oil futures will remain as a physically-settled contract.

Gary King, DME chief executive told the Financial Times that the exchange was responding to industry demands for financially-settled contracts and instruments to arbitrage the price difference between Brent and Oman.

He added that the new contracts would increase trading activity, particularly among Western-based investors.

Investment banks usually prefer financially-settled contracts to avoid the risk of taking physical delivery of the cargo. Refineries and some traders, however, prefer physically-settled contracts.

The DME is a joint venture between the New York Mercantile Exchange and the governments of Dubai and Oman.

The exchange launched its Oman crude oil futures in June but had struggled until recently to build trading activity. Daily trading volumes, however, have picked up in 2008 with an average of 2,000 trades for the front-month contract in January.

The increase in trading at the DME contrasts with the sharp decline in activity at the rival Middle East sour oil contract which was launched by Atlanta-based ICE, also last year.

The Middle East sour-oil future – a similar contract to DME’s Oman, but financially-settled – traded just 44 contracts in January and has failed to trade for most of the last two weeks.

“The addition of the two new contracts will bring us to a new level” in trading activity,” Mr King said. “We expect an increase in volume thanks to arbitrage trading between the Brent and Oman contracts.”

Industry executives and traders consider that daily volume at the DME’s front-month contract needs to surge to an average of about 10,000 contracts for the exchange to be considered a success.

The launch of the new contracts was awaiting regulatory approval, Mr King said.(FT)

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Oil Breaches $95 a Barrel

Crude-oil futures breached $95 a barrel to a fresh one-month high Thursday as fears a recession would drag down oil demand abated.

Light, sweet crude for March delivery was recently up $1.84, or 2% higher, at $95.11 a barrel on the New York Mercantile Exchange after rising to $95.44 a barrel, the highest front-month intraday price since Jan. 10. March Brent crude on the ICE futures exchange, which expires Thursday, was trading up $1.91 at $95.23 a barrel.

In testimony Thursday, Federal Reserve Chairman Ben Bernanke said he sees a "sluggish" U.S. economy picking up later this year and signaled. Source

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U.S. Baker Hughes plans new HQ in Dubai

U.S. based oilfield services firm Baker Hughes plans to invest over $80 million to open a Middle East and Asia Pacific headquarters in the Gulf trade hub of Dubai.
Fellow U.S. oilfield services company Halliburton Co. announced last year it would set up a second headquarters in Dubai, sparking controversy among U.S. politicians, some of whom accused it of trying to get around U.S. sanctions against Iran.

The Dubai-based daily quoted Baker Hughes CEO and Chairman Chad Deaton as saying the new Dubai facility will be built on a 25-acre site in the Jebel Ali free zone and house 800 full-time staff.

"The new Baker Hughes campus in Dubai demonstrates our commitment to serving customers in the Middle East, developing a highly qualified, diverse employee base in the Eastern Hemisphere," it quoted Deaton as saying.

Baker Hughes said last month its fourth-quarter profit rose to $400.5 million, helped by growth in its international markets.

It said it expected spending increases in North America to be "no more than moderate" in 2008 while growth outside North America was likely to continue, albeit at a slower pace than recent years.

The Gulf is the source of about one-fifth of the world's oil supplies and Gulf economies have been developing at a galloping pace, fuelled by windfall profits from soaring oil prices.

Dubai, which is in the midst of a construction boom, has attracted many multinationals, some of which use it as their regional base.(Reuters)

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ADNOC announces crude oil prices for January

The Abu Dhabi National Oil Company (ADNOC) has announced the prices of its crude oil for January, 2008.

The company priced the Murban at US$92.25 per barrel, Lower Zakum at US$92.30, Umm Al Shaif at US$91.50 and Upper Zakum at US$88.20 per barrel. (WAM)

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