Oil futures rose to an all-time high near US$121 a barrel yesterday in Asia, fueled by worries about threats to supply and a weakening of the US dollar.
The surge in oil prices was also fueled by hopes that the US economy would be spared a sharp downturn after the release of data on Monday showing an unexpected expansion in the US service sector last month, analysts said.
Light, sweet crude for delivery next month rose to a record US$120.93 a barrel in electronic trading on the New York Mercantile Exchange yesterday. The contract later retreated to US$120.24 a barrel, up US$0.27 from Monday’s close.
Crude futures settled on Monday at US$119.97 a barrel, up US$3.65 from Friday’s close.
“The bulls are in control of the market,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
“The economic report out of the US yesterday on the service sector seems to suggest the economic slowdown may not be as deep as initially thought,” he said.
“The sentiment is that the oil pricing is likely going to stay quite strong, with a lot of volatility,” Shum said.
The dollar weakened against the euro on Monday, attracting investors to oil and other commodities viewed as hedges against inflation. Also, a falling dollar makes oil less expensive to investors overseas.
Supply outages or potential threats to supply emerged in Iran and Nigeria over the weekend and from Iraq on Monday; events in all three nations have caused prices to spike many times in recent months.
Amid the occasional threats to crude supplies, global demand for oil continues to grow.
While demand for oil and gasoline has been soft in the US, the Chinese and Indian economies are growing by double digits, which is boosting global demand for oil.
Brent crude oil futures rose US$0.72 to US$118.71 a barrel on the ICE Futures exchange in London.