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Oil Prices Retreat After Closing Above $100 A Barrel on Tuesday |
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Thursday, 21 February 2008 |
 BANGKOK _ Oil prices retreated Wednesday in Asia after closing above US$100 a barrel for the first time overnight as investors seized on a refinery explosion and the possibility that OPEC may cut its output. The spike in crude Tuesday rattled Asian financial markets, with Tokyo´s benchmark stock index falling more than 3 per cent.
BANGKOK _ Oil prices retreated Wednesday in Asia after closing above
US$100 a barrel for the first time overnight as investors seized on a refinery
explosion and the possibility that OPEC may cut its output.
The spike in crude Tuesday rattled Asian financial markets, with Tokyo´s
benchmark stock index falling more than 3 per cent.
Many recent forecasts have said oil demand growth this year will be less than
initially expected _ yet prices continue to rise. That suggests oil may continue
rising as the weakening U.S. dollar attracts new investors to the futures
market.
Other factors lifting oil above the US$100 mark were concerns about a falling
dollar, the threat of new violence in Nigeria and continuing tensions between
the U.S. and Venezuela.
"The oil price continues to be supported by concerns over oil supply," said
David Moore, Commonwealth Bank commodity strategist, in a daily research note.
"There is speculation that OPEC will either leave oil production levels
unchanged, or, possibly, even reduce production following the 5 March OPEC
meeting," he said.
Light, sweet crude for March delivery fell 71 cents to US$99.30 a barrel in
Asian electronic trading on the New York Mercantile Exchange by midafternoon in
Singapore.
The contract rose US$4.51 on Tuesday to settle at a record finish of US$100.01 a
barrel, after earlier rising to a trading record of US$100.10 a barrel. It was
the first time since Jan. 3 that oil had been above US$100.
Prices are still within the range of inflation-adjusted highs set in early 1980.
Depending on how the adjustment is calculated, US$38 a barrel then would be
worth US$96 to US$103 or more today.
The rise spooked global equity markets amid worries that high oil prices will
further crimp consumer demand, one of the primary drivers of the U.S. economy.
In addition to declines in Tokyo, Hong Kong´s Hang Seng stock index was down
more than 2 percent in afternoon trading. On Tuesday, the Dow Jones industrial
average closed 0.1 percent lower, erasing early gains.
Crude futures offer a hedge against a falling dollar, and oil futures bought and
sold in dollars are more attractive to foreign investors when the greenback is
falling.
Source: Shana
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