LONDON, 27 October 2007 — Oil rallied to a fresh record high above $92 a barrel yesterday as the dollar tumbled to a record low. Oil prices reflected nervousness in the market over the US imposition of new sanctions on Iran and gunmen hampering oil production in Nigeria.
Gold also touched a new 28-year record on the back of a weak dollar.
Oil’s bullish momentum has pulled in increasing amounts of speculative investment and waves of technical buying have been triggered as US oil pierced successive lines of resistance.
US crude settled up $1.40 at $91.86, off the record $92.22. It is closing in on its inflation-adjusted high of $101.70 seen over the course of April 1980, a year after the Iranian revolution and at the start of the Iran-Iraq war.
London Brent was up $1.21 at $88.69.
Institutional money has been flooding into oil and other commodities since the US Federal Reserve cut interest rates in August.
“It’s more or less nobody wants to be short in this market,” said Markus Mezger, who manages investment portfolios at commodities hedge fund Tiberius.
But sentiment is now overheated and the supply/demand picture is not so supportive. “We don’t find that prices are supported fundamentally above $80,” Mezger said. “On the demand side, the world economy might not be in such a good shape,” he said. “Supply is increasing from OPEC from November on and we think there might be a second decision to increase output again.”
On Thursday the United States placed new sanctions on Iran, the world’s fourth-biggest oil exporter.
An attack on a Nigerian oil rig operated by Italian firm ENI shut 50,000 barrels per day of production and reminded investors that Africa’s biggest producer is a long way from restoring order and normal output in the oil-rich delta.
The dollar index, which tracks its progress against six major currencies, fell to 77.008, the lowest since its post-Bretton Woods inception over 30 years ago.
Partly as a result, gold hit $778.80 an ounce, the highest level since January 1980. It was later at $775.30.
