Oil Prices Flirt with $103 Barrel Mark

February 29, 2008

(Long Island, N.Y.) For a brief moment yesterday, Sweet crude and Oil prices at the New York Mercantile Exchange surged above $103 a barrel which set an all-time high for in-day trading in the US oil market before settling down to close at $102.52 for deliveries in April.

As the US dollar weakens against most major currencies worldwide, more traders see it as an opportunity to invest in the oil market rather than in monetary currency which is highly volatile right now, giving the Oil market fresh new investments coming in. Another key component for the recent oil price hike at the NYME was Federal Reserves chairman Ben Bernanke’s comment with President Bush on Thursday in its efforts to stave off stagflation and the Feds plan to further cut interest rates.

“It seems that further interest rate cuts, additional dollar weakness and more investment buying will anchor oil to higher prices,” energy risk management firm Cameron Hanover said. “It can’t go on forever, but it looks like it can go on for a while.”

On Monday, Federal Reserve’s Chairman Ben Bernanke appeared at Capitol Hill to testify in front of the House Financial Services Committee on the current state of the US economy and announced his bureau’s intentions of slashing down interest rates yet again if the economy calls for it. This statement drove fear to investors as interest rate cuts mean a parallel decrease in the US currency.

“Due to the weakening dollar and the rising fear of inflation, investors have put money into commodities, oil included,” said Victor Shum, an energy analyst with Purvin & Gertz. “Commodities, as tangible assets, do not face as much inflationary threat as opposed to holding a currency, even though the value of money is changing, the asset continues to have an intrinsic value. We’ve seen seven straight weeks of builds in crude oil inventories. The oil market fundamentals are softening and yet we see record highs being set, day in and day out.”

Posted by News LI Editor · Edited by Brianna - Filed Under Money