Economy
Oil Price Marks Record Height

EP Desk 

Prices of crude oil soared to new heights of $110/bbl March 12, with traders shrugging off bearish reports of high inventories as the US dollar fell to historic lows against the euro. 

According to the international media, the euro passed the $1.55 threshold for the first time in a daylong drive as the European Central Bank refused to cut interest rates as has the Federal Reserve System.

Reports said that the dollar fell to a 12-year low against the Japanese yen and a historic low against the Swiss franc. The falling value of the US dollar prompted investors—and speculators—to put their money into commodities like oil and gold futures, which for the first time hit $1,000/oz. 

"The current dynamics of the oil market clearly show that the responsibility for crude oil above $110/bbl lies more with (Jean-Claude Trichet, President of the European Central Bank) than with (Ali I. Al-Naimi, Saudi Arabia's Oil Minister)," Olivier Jakob at Petromatrix, Zug, Switzerland, was quoted as saying.

"The dollar index was down 1%, crude oil had to be up 1%. The current dollar to oil trade is simple, and the paradox remains that the European Central Bank is the creator of the same inflation it is trying to combat. The dollar will remain the dominant factor until the US Federal Reserve board's meeting March 18, but oil will also have to balance with equities under the pressure of more credit hedge funds going belly-up," said Jakob. 

Jacques H. Rousseau, an analyst at Soleil-Back Bay Research, in a separate report, said: Although we expect seasonally rising demand and lower supply to reduce inventories in the coming weeks, gasoline is likely to remain a weak product for refiners well in the second quarter." 

The April contract for benchmark US sweet, light crudes at first retreated following the March 12 EIA report but then climbed to a record high as $110.20/bbl in intraday trading as the dollar market fell.

It closed at a record $109.92/bbl, up $1.17 for the day on the New York Mercantile Exchange. The May contract advanced $1.05 to $108.57/bbl. On the US spot market, West Texas Intermediate was up $1.17 to $109.93/bbl. Heating oil for April delivery increased 2.87¢ to $3.02/gal on NYMEX. The April contract for reformulated blend stock for oxygenate blending (RBOB) inched up 0.25¢ to remain virtually unchanged at a closing average of $2.73/gal. 

The April natural gas contract increased 1.1¢ to $10.01/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., dropped 12¢ to $9.70/MMbtu. 

In London, the April IPE contract for North Sea Brent crude escalated $1.02 to $106.27/bbl, also a record. The March gas oil contract was unchanged at $979.75/tonne. 

The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes climbed 81¢ to $101.38/bbl on March 12.