Oil price holds close to record high of US$106
Posted: 07 March 2008 1434 hrs

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SINGAPORE - Oil prices held close to record highs near US$106 a barrel Friday as the market continued to worry about supplies and and a tumbling US dollar, dealers said.

In morning trade, New York's main oil contract, light sweet crude for delivery in April, rose 13 cents to US$105.60 per barrel.

The contract had closed up 95 cents at a record high of US$105.47 a barrel Thursday after rallying to an unprecedented trading peak of US$105.97 in earlier trading at the New York Mercantile Exchange.

In London, Brent North Sea crude for April delivery was up eight cents at US$102.69, after settling at a record finish of US$102.61 on Thursday.

The contract had earlier struck a record trading peak of US$102.95.

"Prices remain strong as the US dollar fell to record lows," said Victor Shum of Purvin and Gertz energy consultants in Singapore.

"Oil and other commodities have been driven by financial investors seeking a safer haven from the turmoil in equities."

Dollar-priced raw materials like oil tend to gain from the weak US unit because a fall in the dollar makes them cheaper for buyers using other, stronger currencies.

The dollar has been hit by a stream of weak economic data in a continuing fallout from a crisis in the US housing market. The euro has been on a record breaking run for weeks, topping 1.50 dollars on February 26.

Prices continued rising after the OPEC cartel decided Wednesday to maintain output despite calls from the West for a hike to help dampen runaway prices that could threaten global economic growth.

In announcing it would maintain daily production at the current level of 29.67 million barrels, the Organization of the Petroleum Exporting Countries said the market was "well-supplied" -- a sentiment not fully shared by traders.

The market had already gained support from figures showing lower US crude reserves a day earlier.

The US Department of Energy said Wednesday that American crude inventories tumbled 3.1 million barrels last week, marking the first weekly drop for one and a half months.

The news shook the market, which had been expecting a gain of 2.4 million barrels, and sent New York crude spiking close to 105 dollars on Wednesday.

Shum said that despite the large decline, inventories were "slightly above the five-year average at this time of year" and that there was no shortage of oil.
- AFP/ir