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Financial Times: Oil close to breaching $110 a barrel

By Javier Blas and Neil Dennis
Published: March 11 2008 11:10 | Last updated: March 11 2008 20:11

Oil came close to breaching $110 a barrel, boosted by signs that demand in China remained robust and investors were seeking protection against further weakness in the US dollar.

The rise in oil prices came after the International Energy Agency, the western countries’ energy watchdog, said that global oil demand growth in 2008 was relatively robust in spite of record prices and an economic slowdown in the US.

The IEA said world oil demand would grow this year by 1.7m barrels a day, up from 0.9m b/d in 2007. It said demand would hit an average of 87.5m b/d, down 80,000 b/d from its previous estimate.

The agency noted that transport fuel demand in China remained “very strong” with year-on-year gains in January for petrol of almost 12 per cent and for gasoil of about 18 per cent.

The lower demand baseline will be largely offset by weakness in non-Opec supply. The IEA also cut by 50,000 b/d its forecast of non-Opec supply growth in 2008 to 910,000 b/d, meaning that the overall balance of supply and demand remained roughly unchanged in March, analysts said.

The western countries’ watchdog said the surge in oil prices was boosted by “strong distillate markets, geopolitical tensions, and Opec’s decision to rollover targets until the end of the summer”.

Nymex April West Texas Intermediate jumped to a fresh all-time high of $109.72 a barrel. It later traded 43 cents higher at $108.33 a barrel.

Futures prices as far as February 2009 traded above $100 a barrel as investors continued to buy long-dated contracts in a bet that current record prices would continue in the medium term.

ICE April Brent rose to an intraday high of $105.82 and later traded 62 cents higher at $104.78 a barrel.

The crude oil price gains were only stopped after the US Federal Reserve said it was acting, in concert with the European Central Bank and the central banks of Canada, the UK and Switzerland, to help ease the growing liquidity crisis in global financial markets.

The announcement acted as a strong tonic for the dollar, which only an hour or two before had hit a new low against the euro. The dollar’s rally hit oil prices, which have risen in recent months partly in response to the currency’s weakness.

The price of base metals, with the exception of tin, fell as investors took profits from last week’s strong gains.

The price correction came in spite of further supply disruption, particularly in aluminium production.

BHP Billiton, the mining group, yesterday revealed that output would fall this year by 120,000 tones in South Africa following power disruption.

Copper prices at the London Metal Exchange fell 0.5 per cent to $8,295 a tonne while aluminium prices lost 2.5 per cent to $3,065 a tonne.

Agricultural commodities prices traded higher boosted by a report by the US Department of Agriculture that wheat inventories would fall this year more than previously expected. CBOT May wheat rose the 60 cents daily limit to $12.23 a bushel. CBOT May corn rose 12¼ cents to $5.78 a bushel.

Coffee prices rose 2.5 per cent to 153.05 cents a pound after the International Coffee Organisation warned that farmers were cutting the use of fertilisers amid record prices, threatening production.

Copyright The Financial Times Limited 2008 and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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