|Oil backs off all-time high - Oil prices held steady Tuesday in Asia after blasting overnight to a new record near $104 a barrel and then falling back. Oil futures - propelled by the weak U.S. dollar - climbed past $103.76 a barrel Monday on the New York Mercantile Exchange, breaking what many analysts consider to be the true record high for oil after the $38 per barrel price from 1980 is adjusted for inflation. -CNN|
Paris, March 4, IRNA - The surge in energy prices is taking place as investors seek refuge in commodities to offset a slowing economy and a declining dollar.
International Herald Tribune said that financial institutions like pension funds and hedge funds are also buying oil and other commodities like gold as hedges against a rise in inflation.
That trend is expected to continue, especially after Ben Bernanke, the chairman of the Federal Reserve, signaled last week that he was ready to cut interest rates further to bolster economic growth, despite rising consumer prices.
Saudi Arabian oil minister, Ali al-Naimi, said crude prices were unlikely to fall below dlrs 60 a barrel because the cost of developing new supplies, from sources like Canadian tar sands, is rising.
"Therefore, a line has been drawn below which the price cannot fall," Naimi said in an interview published over the weekend by Petrostrategies, an industry newsletter in Paris.
Naimi's comments came as the OPEC oil cartel prepares to meet on Wednesday. It is expected to leave its production levels unchanged.
The oil producing group suggested last month that it might curb production soon to make up for a seasonal decline in oil demand.
But with oil prices at current levels, analysts said members of the Organization of the Petroleum Exporting Countries would find it politically difficult to curb their output now.
Some analysts expect oil producers to trim their production informally to avert an oil surplus in coming weeks.
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