Oil holds near fresh record highs amid OPEC jitters, dollar weakness

Mon, Mar 3 2008, 17:12 GMT
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LONDON (Thomson Financial) - Oil held near fresh record highs set earlier as players remained nervous ahead of this week's OPEC output meeting in Vienna, and as the dollar continued to trade near record lows against the euro.

A weak dollar tends to make dollar-priced oil cheaper for holders of foreign currency.

At 4.49 pm, New York's WTI crude for April delivery was up 1.80 usd at 103.65 usd per barrel, having earlier risen to an all time peak of 103.95 usd.

Meanwhile in London, Brent crude for April delivery was up 1.63 usd at 101.75 usd per barrel, having set a record 102.29 usd earlier.

"(There's) continuing concerns over what's going to come out of Wednesday's OPEC meeting and again it's really just a dollar story," said Bank of Ireland analyst Paul Harris.

He added there is no shortage of geopolitical tensions in key producing countries supporting oil. On the other hand, he believes the price spike is not sustainable and that prices could retreat after the OPEC meeting.

OPEC is widely expected to keep output levels unchanged at its meeting Wednesday, although market players are to so some extent still nervous about the outcome and hesitant to sell just yet.

Once the cartel confirms its decision though, and especially if it makes soothing overtures in the form of plans for further meetings to assess output, prices could retreat.

OPEC oil ministers arriving in Vienna for the meeting have continually indicated they see no need to hike output for now, even though they remain concerned about the global economy.

MF Global analyst John Kidluff said uncertainty ahead of the OPEC meeting, a weak dollar and geopolitical tensions will likely "put at least a temporary floor under prices".

Moreover, he said, players are choosing to ignore the market's weakening fundamentals and overbought status and will likely continue doing so until "sagging oil demand become blatantly obvious".

Oil prices were down in earlier trades as players took profits amid renewed weakness in global equity markets, which sparked temporary worries that demand might wane going forward.

The worries have since faded again, amid renewed dollar weakness, OPEC jitters ongoing worries about actual and potential supply disruptions in key producing countries, and strong fund interest.

Data out on Friday showed speculators on the NYMEX exchange in the US increased their net long positions or bets on price gains in oil by 51 pct last week.

"From an oil perspective this rally like that across the commodity sector remains rampant as funds/specs continue to seek safer havens from an ailing Equity market," said MF Global senior broker Robert Laughlin.

Elsewhere, tensions are rumbling on in key oil producing countries.

In Nigeria, Africa's top producer, a small group of rebels blew up a police vessel in a creek at Bonny Island, an oil export hub located in the Niger Delta region.

Meanwhile the UN security council is meeting today to consider imposing further sanctions on Iran, having possibly found evidence the country's nuclear programme is linked to weaponry.

Iran is the world's fourth largest crude producer.