Oil steadies near $100
Foreign Desk Report

LONDON—Oil held near its lifetime high of $100 a barrel on Thursday, fuelled by expectations of another fall in U.S. fuel stocks and a struggling dollar. Its rise to triple digits may help push top consumer the United States — battered by a housing crisis and credit crunch — into recession. European Union economies could also suffer if the spike is prolonged, said the European Commission.
But after rising 57 percent in 2007, oil and other commodities may push higher still, analysts said. Gold and platinum also drew strength from dollar weakness to hit fresh record highs on Thursday. U.S. crude eased 17 cents from the previous close to $99.45 a barrel by 7:47 a.m. EST. U.S. crude traded a single lot at $100 a barrel on Wednesday, stoked by violence in OPEC exporters Nigeria and Algeria. London Brent crude shed 15 cents to $97.69.
“We still have our maximum quota on oil and we don’t see any reason to lighten up our position at all since all the risks are still to the upside,” said Justin Wilks of the index-based Global Commodities fund group in Australia. “Our appetite for oil hasn’t waned at all.” The focus later on Thursday will shift to sinking U.S. crude stocks, which were expected to have fallen by another 2.2 million barrels last week, a seventh successive draw, a Reuters poll found.
Weekly data will be released on Thursday at 10:30 a.m. EST. The weakness of the U.S. dollar has also spurred speculative buying that boosted oil and other commodities as it makes dollar-denominated assets relatively cheap. On Wednesday, the dollar traded around 1.4750 to the euro, little stronger than its low of 1.4966 to the euro in November, according to Reuters data.
Despite oil rocketing to $100, the White House said it will not open up the nation’s emergency crude reserves to ease prices. Nor will the Paris-based International Energy Agency (IEA), adviser to 27 consumer nations. “We are not going to carry out (an emergency) oil stock release,” William Ramsay, the IEA’s deputy head told Reuters. “We don’t respond to prices, and we don’t see any disruption in the physical oil market.”
Officials from the Organization of the Petroleum Exporting Countries said the group could do little to halt the rally. Oil prices edged up Thursday, moving closer to the record $100 a barrel reached briefly a day earlier on escalating violence in Nigeria, a weaker U.S. dollar and a view that global demand for oil will outstrip supplies.
Analysts said crude futures could top $100 a barrel if the U.S. government reports crude inventories fell by more than expected in a report expected later Thursday.
“We’re so close to $100 right now,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “If the U.S. inventory report indeed shows stock draws, and particularly bigger than expected draws, plus a heightening of geopolitical risks and a falling U.S. dollar, all these factors could push pricing beyond $100.”
Investors are anticipating that U.S. crude inventories fell by 1.7 million barrels last week, which would be the seventh straight weekly drop. The U.S. Energy Information Administration’s inventory report, delayed until Thursday this week due to the New Year’s holiday, is also expected to show gains in gasoline supplies and refinery activity, and a decline in supplies of distillates, which include heating oil and diesel.
In a research note, Vienna’s PVM Oil Associates noted signs that U.S. gasoline demand is declining due to high prices, saying that in the week ending Monday consumption was some 9.5 million barrels per day, which is about 5.5 percent lower than a year ago.” Oil and gasoline demand in the surging economies of China and India have sent prices soaring over the past year, and tensions in oil producing nations like Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices higher.
Violence in Nigeria helped give crude the final push to $100. Bands of armed men invaded Port Harcourt, the center of Nigeria’s oil industry Tuesday, attacking two police stations and raiding the lobby of a major hotel.