Oil price hits new record above US$92

By Janet McBride and Jane Merriman, Reuters

LONDON — Oil rallied to a fresh record high above US$92 a barrel on Friday as the dollar tumbled to a record low, Washington imposed new sanctions on Iran and gunmen shut more oil production in Nigeria.

Oil’s bullish momentum has pulled in increasing amounts of speculative investment and waves of technical buying have been triggered as U.S. oil pierced successive lines of resistance.

At 1246 GMT U.S. crude was up US$1.14 at US$91.60, off a record US$92.22. It is closing in on its inflation-adjusted high of US$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 93 cents at US$88.41.

Institutional money has been flooding into oil and other commodities since the U.S. 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 US$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.”

This might tip the balance of the global oil market into a small surplus for the fourth quarter, he said.

On Thursday the United States placed new sanctions on Iran, the world’s fourth biggest oil exporter, and accused its Revolutionary Guard of spreading weapons of mass destruction. Iran is at odds with the United Nations over its nuclear programme.

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.

Unprecedented weakness in the dollar has been another factor driving prices of dollar-denominated commodities higher.

In anticipation that the U.S. Federal Reserve may cut interest rates next week, the dollar hit fresh record lows against the euro and a basket of currencies on Friday.