Oil above 107 dollars in Asian trade but off record levels

Tue, Mar 11 2008, 05:45 GMT
http://www.afxnews.com

SINGAPORE (Thomson Financial) - Oil eased from record levels in Asian trade Tuesday but underlying momentum remained strong because of the weak greenback and supply concerns.

In afternoon trade, New York's main contract, light sweet crude for April delivery fell 25 cents to 107.65 dollars a barrel from its record finish of 107.90 dollars in US trading hours Monday.

The contract had surged to a new trading high of 108.21 dollars in New York Monday as investors bet on oil prices to continue marching north on expectations the greenback would remain weak.

London's Brent North Sea crude for April delivery dropped 25 cents to 103.91 dollars a barrel. The contract hit a trading high of 104.42 dollars Monday and closed at a new record 104.16 dollars.

OPEC's decision last week to keep its daily production levels unchanged despite pressure from the United States, the world's biggest energy user, was also lending support to the market.

Investors are also rushing into the commodities markets, including oil, which they regard as safe haven.

"There's increased nervousness about other asset classes so I think we are seeing by default, funds flowing into commodities (including oil)," said Mark Pervan, a senior commodity strategist with ANZ bank in Melbourne.

"It is really seen as a safe haven at the moment so there is a lot of momentum which can continue to push prices higher," he said.

Meanwhile, US President George Bush's administration has signalled that Vice President Dick Cheney personally would urge OPEC kingpin Saudi Arabia to convince the cartel to boost output.

Cheney is expected to raise the issue of soaring oil prices with Saudi Arabia on his trip to the Middle East next week.

"I'm sure that energy issues will come up," White House spokeswoman Dana Perino said.

"Obviously we want to see an increase in production."

The US economy is seen as the worst hit if oil prices continue to skyrocket because of its heavy dependence on imported oil and the weak greenback exacerbates the situation.

"The US market is really feeling the pinch," said Pervan. "One is slowing growth and they bear the full brunt of high prices in terms of US dollars."

The weak US currency, which fell to a new low of 1.5464 against the euro last week, encourages demand for dollar-priced commodities like oil because it makes them cheaper for buyers using other currencies.

In afternoon Asian trading, the euro traded around 1.5341 dollars.