Oil price holds steady over $100 mark

Oil prices returned above 100 US dollars a barrel today as traders continued to worry about the prospect of a cut in global production.

The cost of light, sweet crude reached a record 100.40 in New York trading at one point, passing yesterday’s record closing price of 100.01 dollars.

Prices have spiked in recent days over speculation that the Organisation of Petroleum Exporting Countries (Opec) will reduce output in the coming months. Yesterday saw a 4.5% surge in trading on the New York Mercantile Exchange (Nymex), following a 3% rise last week.

The hikes have rattled financial markets across the world, worrying investors that the higher prices could act as a brake on economic growth. London’s FTSE 100 Index closed more than 1% lower today.

They could also spell bad news for UK motorists after the AA said a recent drop in oil prices had failed to translate into weaker prices at the petrol pump.

The motoring organisation said yesterday that unleaded petrol prices in the UK were back above 104p a litre, while the average cost of diesel was near the 110p a litre mark.

Analysts said Opec oil-producing nations might cut production in response to the slowdown of the US economy.

Other factors lifting oil above the 100 dollars a barrel mark were concerns about a falling dollar, the threat of new violence in Nigeria and continuing tensions between the US and Venezuela.

David Moore, Commonwealth Bank commodity strategist, said: “The oil price continues to be supported by concerns over oil supply. There is speculation that Opec will either leave oil production levels unchanged, or, possibly, even reduce production following the March 5 Opec meeting.”

Yesterday’s spike took oil prices above 100 dollars a barrel for the first time since January 3.

It remained close to the barrier today, falling 71 cents to 99.30 dollars a barrel during Asian electronic trading in Singapore, but rising when Nymex itself opened for business.

Prices are still within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, 38 dollars a barrel then would be worth 96 to 103 US dollars or more today.

In London, April Brent crude fell 75 cents to 97.81 dollars a barrel on the ICE Futures exchange.