Oil set to hit $100 a barrel

OIL prices look set to top $100 per barrel as fears of a Turkish invasion of northern Iraq mount.

US dollar weakness, which saw the US currency hit new lows yesterday against the euro, are adding to the oil price pressure as speculators rush to buy oil as a hedge against the falling greenback.

Combined with dollar weakness, increasing geopolitical uncertainties and concerns about winter fuel supplies should see oil go above $100 a barrel in the US, analysts said.

“There are too many factors that suggests the market could see the price of oil go above $100 per barrel in the US at this stage,” warned Paul Harris, head of natural resources risk management, Bank of Ireland Global Markets.

For Europe the price reference point will be close to $95 per barrel, he said.

Brent crude yesterday traded at $83.30 against further news that Kurds in Northern Iraq killed further Turkish troops on the Northern Iraq border.

That emerging conflict will serve to maintain geopolitical concerns which constituted one of the key drivers of oil prices last week.

The interesting targets for the short-term are $101.70 per barrel and $95 for Brent crude, said Mr Harris.

Those figures would represent new all-time highs against the last peak in 1980 following the flight into exile of the Shah of Iran, Mr Harris said.

Meanwhile the dollar hit a record low against the euro yesterday before recovering as traders reacted to the lack of apparent support for the dollar at the G7 meeting over the weekend.

The G7’s apparent indifference toward the dollar was interpreted as time to sell and the dollar was heavily sold in early trading yesterday.

It followed the failure of G7 officials to offer any semblance of support for the ailing dollar.

“There were some fears that somehow the G7 was going to mention dollar weakness but this was not the case and this gave the green light for dollar selling,” said Chris Turner, head of foreign exchange strategy at ING.

In later trading, the euro was flat at $1.4311 but it had hit $1.4348 earlier, its highest point since the single European currency was launched in 1999.