News #1

Oil extends rally to near $90 over weak dollar

NEW YORK: Oil prices extended a record rally to more than $89 a barrel yesterday as weakness in the dollar, tight fuel inventories and geopolitical concerns drew a wave of investor buying.

Oil's climb of about 13 per cent since last week has renewed concerns that soaring energy costs could hinder world economic growth and raised a red flag for Opec, which may call an early formal meeting to discuss output.

US crude oil futures gained $2.29 to $89.69 a barrel, its fifth record in as many trading days. London Brent crude rose $1.46 to $84.59.

"This is a market that is watching the dollar weakness very closely and as long as the dollar remains weak and stockpiles at the market's delivery point in Oklahoma remain low, this market will keep heading north," said Jim Ritterbusch, president of Ritterbusch and Associates.

Though US oil prices hit a nominal peak, they remain below the inflation-adjusted monthly average high of $101.70 hit in April 1980, a year after the Iranian revolution.

Dealers said yesterday gains were tied to all-time weakness in the US dollar - a factor that has supported all dollar-denominated commodities - alongside tight inventories in the US that have raised winter supply fears.

The dollar fell to a record low against a basket of currencies yesterday, weighed down by soft US economic data and sluggish corporate earnings.

The risk of Turkish military action against Kurdish rebels in northern Iraq was also underpinning oil's gains, dealers said, dimming the prospects of a recovery of Iraqi oil exports from the region and raising the specter that other supplies from the Middle East could also be disrupted.

The factors have attracted a rush of investor cash as big-money funds seek alternatives to markets battered by the global credit crunch.

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