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Oil nears new high of US$102 a barrel as greenback drops

Weakening U.S. dollar prompts investors to invest more money into energy futures

Oil prices rose to a new intraday high near US$102 a barrel yesterday as a slide in the U.S. dollar prompted investors to pump more money into energy futures as a hedge against inflation.
The dollar sank to a record low against the euro after the release of three disheartening U.S. economic reports Tuesday that show that the economy is slowing even as prices are rising. The dollar's decline prompted investors to seek a safe haven from turmoil in the financial markets and the threat of inflation.
"Crude has cracked through the US$100-level again and that's driven by financial investors moving money into commodities markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"The U.S. dollar weakened against the euro and the economic data also indicated that inflation in the U.S. rose in January, and commodities are generally considered a hedge against inflation," Shum said. "We are therefore seeing these strong prices that have really little to do with oil market fundamentals."
Light, sweet crude for April delivery spiked as high as US$101.70 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore, before slipping back slightly to US$101.55, up US$0.67.
The contract on Tuesday jumped US$1.65 to settle at US$100.88 a barrel, a record close.
In London, Brent crude added 65 cents to US$100.12 a barrel on the ICE Futures exchange, below the intraday record of US$100.30 a barrel set earlier in the session.
The U.S. Labor Department said wholesale inflation rose by 1 percent in January on soaring oil and food costs. And Standard & Poor's also reported that U.S. home prices fell 8.9 percent in the last three months of 2007 from a year earlier. It is the sharpest drop in the S&P/Case-Shiller quarterly index's history.
A report by the Conference Board, a business-backed research group, that its Consumer Confidence Index fell to the lowest since February 2003, far below what analysts had been expecting, indicated that consumers might continue to curb their spending in the coming months.
But traders in both the energy market and the U.S. stock market, which also advanced sharply, seemed largely unfazed. 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 American economy is slowing.
In currency trading, the euro rose above US$1.50 for the first time, reaching US$1.5057 before falling back slightly to US$1.5048.
Analysts expect the U.S. Energy Department's Energy Information Administration to report later yesterday that the nation's 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 while 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.
Also supporting prices were concerns about supply disruptions from unrest in Iraq, a major oil exporter. Turkish ground forces pushed their offensive against Kurdish rebels deeper into the north of Iraq, seizing seven guerrilla camps, officials said Tuesday.