By Jonathan Leff
Oil prices surge deeper into record territory, touching $98 on falling dollar and winter fuel crunch concerns.
Oil prices surged deeper into record territory on Wednesday, touching $98 as the dollar plumbed new lows and traders fretted about a winter fuel crunch due to thinning oil stocks and a North Sea storm.
Investors bracing for more fallout from the US subprime crisis and seeking shelter from the US dollar - which hit a new low - have driven oil nearly $30 higher since mid-August and lifted other commodities including gold, now at a 28-year high.
US light, sweet crude for December rose as much as $1.30 to $98 a barrel in active trade of over 9,000 lots, soaring past the previous record $97.10 touched on Tuesday.
London Brent crude also hit new peaks and stood 74 cents higher at $94 a barrel by 0250 GMT.
Signs of thinning global oil stocks ahead of peak winter oil demand have added fuel to the rally, aiding a nearly 8% rise over the past two weeks alone, and prompting many analysts to say it's only a short matter of time before the oil hits $100.
"We had the [North Sea] supply disruptions yesterday, the dollar is weaker, so we're moving higher," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour. Weekly US inventory report due later on Wednesday is expected to show crude stocks in the world's biggest energy consumer had fallen 900,000 barrels last week due to disruptions to Mexican exports, a preliminary Reuters poll found.
Although any bearish surprise there may trigger some profit-taking, Kowalczyk said $100 appeared inevitable.
"I think we'll get there," he said. "The factors that have been driving the recent trend are still in place."
Oil's gains picked up momentum on Wednesday after the US dollar hit yet another low against the euro at $1.4666, with credit market turmoil keeping expectations of another Federal Reserve rate cut alive.
The US Energy Information Administration (EIA) flagged the risk to winter supply on Tuesday, saying stocks in industrialized nations would drop some 20 million barrels below the five-year average by the end of this year amid robust demand and continued caps on output from producer-group Opec.
The EIA, the statistical wing of the Department of Energy, also sharply raised its forecast for US oil prices in 2008 to near $80 a barrel from its prior projection of $73.50.
Further price support came on Tuesday when ConocoPhillips said it may have to shut down five of its 16 oil platforms on its 236,000 barrel per day (bpd) offshore Ekofisk field in the North Sea due to a storm.
Opec, source of more than a third of the world's oil, has agreed to raise production by 500,000 bpd from November 1 and shrugged off calls to expand on that, blaming the rally on speculators and politics.
Analysts have also said that big options positions in the $90 to $100 range may also be forcing investors to cover short positions, contributing to the rise toward an all-time inflation-adjusted high of $101.70 during April 1980.
"We see a number of speculative and technical factors as critical drivers of the latest oil price rally," UBS oil analyst Jan Stuart said in a note.
The road to $100 has grown increasingly bumpy, however. Over the previous seven sessions, oil prices have followed each sharp one-day gain with a $1 or more fall. (Reuters)For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.