NEW YORK - Oil futures surged to a new closing record above US$100 Tuesday as traders sought a safe haven against a U.S. dollar that is coming under increasing pressure from a shaky U.S. economy.
The greenback tumbled at one point to its lowest level ever against the euro, helping drive more money into energy futures. Supply concerns and a bullish attitude among stock traders also helped keep oil prices high.
The U.S. currency also fell against the Canadian dollar on Tuesday, as worries intensified about stagflation in the United States.
"You're seeing more of a switch into commodity prices as a hedge against inflation," said Adam Hewison, president of INO.com, a financial website that specializes in futures trading.
Light, sweet crude for April delivery jumped $1.65 to settle at $100.88 a barrel on the New York Mercantile Exchange. At one point in the session, prices surged as high as $101.15.
Crossing the psychologically significant $1! 00 mark once again - oil prices previously crossed that hurdle to set new records last week - in itself may have helped fuel the rally by triggering computer programs set to buy at certain levels and enticing new speculators into the market, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
"You see additional buying among people who think they're missing something," he said. "Any time you move above ($100 a barrel), you're going to ignite some fresh buying."
Investors who recently were selling on weak economic data seemed to take a spate of bad news in stride.
The Conference Board, a business-backed research group, reported its Consumer Confidence Index fell to the lowest since February 2003, far below what analysts had been expecting, indicating that consumers might continue to curb their spending in the coming months.
Meanwhile, the U.S. Labor Department reported that wholesale inflation jumped on! e per cent in January, more than twice what analysts had been ! forecast ing. That report, coupled with the consumer confidence index, pointed to an economy that is slowing even as prices are rising.
And Standard & Poor's added to homeowners' angst when it said its quarterly home price index tumbled 8.9 per cent in the final quarter of 2007 - the indictator's sharpest decline in its 20-year history.
But traders in both the energy market and the stock market, which also advanced sharply, seemed largely unfazed.
"We're seeing a solid tone to the stock market," Ritterbusch said. "I think the oil market is using the stock market as a proxy for future economic activity."
Last week, March oil rallied to a new settlement record of $100.74 and a new trading record of $101.32 before the contract expired.
Hedge funds looking to cover future positions and foreign buyers, who because of the weak dollar can still lock in oil prices at a relative bargain, may have helped accelerate the day's buying, Hewison said.
O! n Tuesday, the 15-nation euro jumped to $1.4982 before trading late in the day at $1.4967, its previous record.
"In euro terms, oil is not that expensive, and it's likely to go even higher," he said.
In Toronto, the loonie closed at 101.79 cents US, up 1.31 cents on the day after zooming as high as 102.2 cents US.
Also supporting prices were concerns about supply disruptions from unrest in Iraq, a major oil exporter, and warnings by Iran against further international sanctions. Turkish ground forces pushed their offensive against Kurdish rebels deeper into the north of Iraq, seizing seven guerrilla camps, officials said.
Oil has risen in recent days amid an increase in speculative buying, with some traders believing that global demand will be high enough to support higher crude prices even if the U.S. economy is slowing. That thesis will be put to the test Wednesday, when analysts expect the U.S. Energy Department's Energy Information Administrat! ion to report that the nation's crude stocks rose for the seve! nth week in a row.
The government inventories report also is expected to show supplies of distillates, which include heating oil and diesel, fell by 1.8 million barrels last week, according to a Dow Jones Newswires poll of analysts. Cold weather across the Midwest and Northeast has also helped push heating oil prices higher.
On Tuesday, heating oil futures gained 2.97 cents to settle at $2.8150 a gallon, after earlier setting a new trading record of $2.8188 a gallon.
Gasoline prices rose 0.8 cents to settle at $2.5505 a gallon. Gas prices at the pump rose to $3.142 from $3.137 Monday, according to AAA and the Oil Price Information Service.
The EIA report also is expected to show that crude oil stocks rose last week by 2.4 million barrels, which would be the seventh straight week of gains. Gasoline inventories are expected to rise by 400,000 barrels.
Natural gas futures rose two cents to settle at $9.206 per 1,000 cubic feet. Earlier, Gazprom, Russi! a's natural gas monopoly, again threatened to cut supplies to neighboring Ukraine, according to Russian news agency reports.
In London, Brent crude futures rose $1.78 to settle at $99.47 a barrel on the ICE Futures exchange.
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Source: http:/ /www.cbc.ca/cp/business/080226/b0226128A.html
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