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Oil sets new high above $113 a barrel

Associated Press: Oil sets new high above $113 a barrel

Associated Press Writer
Tuesday 15 April 2008

VIENNA, Austria – Oil prices set yet another intraday trading record Tuesday, surging close to $114 a barrel as the U.S. dollar fell and crude oil shipments along one U.S. pipeline were said to be moving below capacity.

Light, sweet crude for May delivery on the New York Mercantile Exchange traded as high as $113.66 a barrel by afternoon in Europe. That was $1.45 above the trading record set last week and $1.90 above Monday’s record settlement close of $111.76 a barrel.

The recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.

“We’ve seen another swing down in the U.S. dollar so I think we saw short term traders go back into oil as a hedge against the falling dollar,” said Mark Pervan, senior commodity strategist at the ANZ Bank in Melbourne, Australia.

Stephen Schork, in his Schork Report, described the rush into oil on the falling dollar as an automatic reflex.

“Traders on the Nymex saw the dollar take another tumble, so they did what they have been conditioned to do when the dollar falls, i.e. they bought crude oil,” he wrote.

Monday’s news from the U.S. bank Wachovia Corp. supported oil prices by making the U.S. dollar less attractive, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Wachovia, the fourth largest bank in the U.S., reported a hefty first-quarter loss and cut its dividend, and said it was forced to seek a $7 billion cash injection to make up for a poorly timed expansion of its mortgage business.

“This news highlights the strains in the banking sector and credit markets and that has led to more dollar selling, and so that tends to drive investors into oil and other commodities,” Shum said.

He said the news from Wachovia as well as disappointing first-quarter results from General Electric Co. on Friday overshadowed concerns raised by the Group of Seven industrialized nations about the dollar’s fall. The G-7 remarks were seen as a warning by some analysts that the group may be contemplating an intervention that could lessen crude’s attraction as an inflation hedge and send it lower.

Crude was also supported by news of disruptions to crude supplies, though analysts said the interruptions were minor.

“They only look like temporary shut downs but … the combination of that and the fact that the dollar was off again was the key,” Pervan said.

The Capline pipeline – the Royal Dutch Shell PLC conduit that carries 1.2 million barrels of crude each day from the U.S. Gulf Coast to the Midwest – was closed on the weekend, and has since resumed operations at a slightly reduced capacity.

In Nigeria, Italian energy giant ENI reported a 5,000 barrel per day reduction in production at one of its facilities.

In other Nymex trading, heating oil futures added nearly 4 cents to sell for $3.25 gallon while gasoline prices rose by close to 3 cents to $2.8491 a gallon. Natural gas futures gained more than 12 cents to $10.175 per 1,000 cubic feet.

Associated Press Writer Gillian Wong contributed to this report from Singapore. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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