Crude oil sets new high in London

Crude oil continued its record-breaking run, setting a new high in London amid fears that demand will outstrip supply
A barrel of benchmark Brent Crude oil touched $53.32, the highest since trading began in 1988, before slipping back to trade at $53.10.

In New York, US light crude oil was selling for $54.85 a barrel, close to its historic high of $55.67.

A late cold snap in the US and Europe has stoked demand for oil at a time when there was little extra supply.

Dollar drop

The weaker US dollar also played its part in the higher oil prices, prompting many investors to switch out of the currency market and into commodities.

A falling greenback also cuts the dollar-denominated cost of crude for many consumer nations and funds, prompting them to increase holdings and compete for limited supplies.

Analysts are predicting that the cost of oil may climb higher still, with some investors preparing themselves for prices of $100.

Many of them pointed to the fact that oil prices stayed high, despite a report from the US Energy Information Administration that showed commercial crude oil inventories were at an eight month high.

“The market is holding on exceptionally well given the bearishness of the data,” said Bill O’Grady, director for futures research at AG Edwards.

According to the EIA, commercial crude stocks rose to a higher than expected 302.6 million barrels in the week ended 4 March, the first time they have topped 300 million barrels since last July.

A report from the industry-supported American Petroleum Institute showed an even bigger rise for crude stocks, up 6.2 million barrels at 304.3 million barrels.

http://news.bbc.co.uk/1/hi/business/4333745.stm