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Oil sets fresh record at $103.95 Oil sets fresh record at $103.95
(about 7 hours later)
Oil prices have surged to a record high on fresh supply fears, and as the US dollar slumped to new lows. Oil prices have surged to a new record high in reaction to the falling dollar and fading hopes of more supply.
US sweet, light crude jumped to $103.95 a barrel, before giving back some gains to trade at $103.40. London Brent also climbed to a record, hitting $102. US light, sweet crude jumped to $103.95 a barrel, before giving back some gains to trade at $102.45. London Brent also climbed to a record, hitting $102.
Oil producer group Opec is not expected to raise output, limiting the amount of crude in the market, analysts said. Analysts blamed the falling dollar, which makes oil an attractive investment to speculators.
At the same time, the weak dollar has pushed crude higher as producers try to offset the currency's drop in value. It also looks increasingly unlikely that oil exporters' cartel Opec will raise production to help ease prices.
Other commodities are also notching up record highs as the weak dollar and record oil prices increase inflation concerns, and stock markets try to price in a deteriorating economic environment and slower global growth. Speculators
Equity markets have been particularly volatile after it emerged last year that banks and other financial firms had been investing billions of dollars in risky investments centred on the troubled US housing market. Analysts said that oil is likely to track movements in the currency markets.
It is uncertain to what extent the resulting lending crisis will hurt businesses and consumers, and in the meantime investors are buying assets they view as less risky. "There is no top in sight yet for crude futures because hedge funds are looking at how far the US dollar will fall," said Phil Flynn of Alaron Trading in Chicago.
Analysts said that oil prices were set to continue their roller-coaster ride of recent months until markets got greater clarity on the impact of the financial market problems and the outlook for global economic growth. "They are buying commodities to hedge against inflation because hanging on to the dollar means they lose value," he added.
Opec has blamed speculators for driving oil prices higher and is unlikely to raise production when it meets in Vienna this week.
"I don't think Opec would consider increasing production because then we would be increasing to meet demand that doesn't exist," said Opec President Chakib Khelil.
Other commodities, including copper and gold have also been surging higher as the dollar has fallen.
US gold prices closed $9.20 higher at $984.20 an ounce.
At one stage in the session the price hit a record $992.00 an ounce.