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Oil rallies to new high above $127
Oil climbed to a new record high above $127 on Friday, driven upwards by a weaker dollar and a bullish market for distillate fuels as China and Europe scramble for diesel amid thin global supplies.
- Agencies
- Published: 17:16 May 16, 2008
London: Oil climbed to a new record high above $127 on Friday, driven upwards by a weaker dollar and a bullish market for distillate fuels as China and Europe scramble for diesel amid thin global supplies.
US crude for June delivery climbed to a peak of $127.43 but then eased to stand at $126.65 at 1241 GMT, up $2.53.
July ICE Brent was $2.72 higher at $125.35 a barrel.
The dollar weakened against the euro, adding to Thursday's losses after data showing US industrial production fell 0.7 percent in April, the biggest drop in the manufacturing sector since September 2005.
Oil and the US currency have become closely intertwined in recent months as investors have turned to oil as a hedge against the falling dollar.
Chinese demand for imported diesel is expected to rise sharply in June after this week's deadly earthquake disrupted gas supplies to major cities and as companies build stockpiles ahead of the summer Olympics.
"People are looking at diesel. The situation is worse since the earthquake on Monday in China," said Robert Laughlin at MF Global. "Demand is robust as there are so many recovery processes going on."
Comments from Saudi Arabia's Oil Minister Ali Al Naimi on Thursday predicting a sharp rise in Asian oil consumption over the next 20 years added to worries about competition for fuel supplies, Laughlin said.
Al Naimi said Asian oil consumption was expected to rise by 20 million barrels a day, driven by strong economic growth, and would account for 60 per cent of the increase in global crude demand by 2030.
Thin gas oil stocks in northwest Europe caused by a string of refinery outages have also prompted European players to scramble for Asian barrels.
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