USA: Oil prices flirt with $100 a barrel

Oil prices come very close to hitting the $100 a barrel mark. Oil held above $98 a barrel on Wednesday (November 21), after closing in on the $100 milestone as the dollar hit new lows and cold weather in the United States, the world's biggest fuel consumer, stirred anxiety over winter supplies. U.S. light crude surged to a record $99.29 early in the session, but then edged down from this peak to stand at $98.39, up 36 cents at 8:04 a.m. EST. Prices blasted past the previous $98.62 record, extending a rally that has lifted oil by 45 percent since mid-August as speculative investment rises, supplies tighten and the dollar weakens. Phil Flynn, a senior market analyst for Alaron Trading Corp. says, "We're so close, but no cigar yet for the $100 cigar, and believe it or not the Federal Reserve tried to do everything they could to help us get to $100, but it couldn't quite do it. Why didn't it do it? I think this market is a little bit hesitant to hit that level just yet. There are still a lot of questions. For example, yesterday if you look at the Federal Reserve, they are talking about a slowing economy. Yes that means that we will probably see more interest rate cuts. That probably means more even pressure on the dollar, but it also means if the economy is going to slow, perhaps the demand for oil will slow as well." Oil's strength is in part a result of the weakness of the dollar, which has spurred buying of relatively cheap dollar-denominated commodities. The dollar sank to a new record low against the euro and versus a basket of currencies on Wednesday after the U.S. Federal Reserve cut its growth outlook for next year, boosting chances of another interest rate cut in December. High oil prices could add to pressures on the fragile U.S. economy, which could ultimately impact demand for oil. The rising cost of oil, for example, could force more than three-quarters of Americans to tighten their budgets by cutting fuel use or by slashing spending elsewhere, according to a Reuters/Zogby poll. Some 32.5 percent of people surveyed said they would drive less if oil prices kept rising, while 20.8 percent said they would try to conserve energy at home and 22.8 percent said they would cut spending on retail and entertainment.

ITN Source | November 22, 2007

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