Oil price rise down to 'slumping' dollar

There were fresh hikes in oil prices today after signals from the oil-producing Opec cartel that it would leave production levels unchanged.

Speaking in Vienna, Austria, Opec president Chakib Khelil said there were no supply issues for crude and the 13-nation group was not inclined to either boost or reduce its current output of about 32 million barrels a day.

His comments saw prices of light sweet crude for April delivery rise by nearly two dollars a barrel to 101.19 dollars in New York today.

They had previously settled to below the 100 dollar mark ahead of the Opec meeting from recent record highs of just under 104 dollars last week.

Prices have risen sharply in the past month as concerns over production and a weak dollar prompted investors to move cash to crude and other commodities as a hedge. The record levels have seen the US and other major industrialised nations urge Opec to pump more oil to help to help lower prices.

But Khelil said the high prices were not being driven by production and blamed global economic uncertainty for the rises.

He said in his opening address: “The growing sense of despondency about the future global economic outlook is generating much uncertainty in energy circles.

“There have been signs that the oil market is moving into a new phase. It should be characterised by stability and not volatility.”

Saudi Arabia, Opec’s biggest producer and most influential member, also said it saw no reason to change output targets.

Oil analyst and business professor at St John’s University in New York, Anthony Sabino, said: “In truth, OPEC’s decision not to pump more oil is a reflection that supply is relatively good.

“What is driving oil prices up to the stratospheric level of over 100 US dollars per barrel is the US economy, now undeniably in recession,” he said.

“It’s not so much the price of oil is going up – it’s that the value of the US dollar, sad to say, is slumping.”

Opec satisfies about 40% of the world’s demand for crude.

Its 13 members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Iraq is the only member not subject to the cartel’s output quotas.