LONDON — Oil leapt to a record high for a third day on Monday, surpassing US$93 as investors bet on another U.S. interest rate cut this week, the dollar struck new lows and Mexico briefly halted one-fifth of its oil production.
U.S. crude, which hit a high of US$93.20 a barrel earlier, was trading at US$91.92 by 1507 GMT, up six cents from the previous close. London Brent, which hit a record US$90, was up 33 cents at US$89.02 a barrel.
Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have attracted a fresh wave of investment capital.
“Every new bullish factor pushes U.S. crude irrationally closer to US$100 barrel,” said SGCIB. But the bank went on to say: “Prices will fall if the FOMC does nothing.”
The U.S. Federal Reserve’s Federal Open Market Committee meets on Oct. 30-31. Wall Street is betting on another rate cut as the U.S. housing downturn deepens.
That expectation helped push the dollar to another record low against a basket of currencies, boosting the price of dollar-denominated commodities.
Central banks have poured billions of dollars into financial markets to ease a liquidity crisis. Much of that money has found its way into energy, commodities and emerging markets.
“In our view, implied volatility in crude oil options looks attractive… In addition, crude oil volume also looks attractive relative to volume in other asset classes,” Merrill Lynch analysts wrote in a research note.
A strategist at Standard Life Investments said hedge funds had played a big part in driving oil prices towards US$100.
“There’s huge amount of speculation from hedge funds and others, they are all focused on the US$100 barrel mark,” said investment director Frances Hudson. “If volatility decreases significantly, they’d stop playing.”