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Oil prices hit record highs amid dollar weakness

World oil prices soar to new records, breaching $98 a barrel as the dollar weakens against other major currencies.

business Updated: Nov 21, 2007 17:34 IST

World oil prices soared to new records Tuesday, breaching 98 dollars a barrel in New York, amid supply concerns and as the US dollar continued to weaken against other major currencies.

New York's main oil futures contract, light sweet crude for January delivery, soared 3.39 dollars to close at 98.03 dollars per barrel.

Prices in New York hit an all-time high of 98.62 dollars on November 7 during intraday trading, but Tuesday marked the first time prices had closed above 98 dollars.

In London, the price of Brent North Sea crude for January delivery surged 3.21 dollars to settle at 95.49 dollars per barrel, smashing a prior high of 95.19 dollars struck in November 7.

In after-hours trade, Brent crude was trading at even higher levels, at 96.24 dollars a barrel.

Some analysts believe oil prices could soon strike 100 dollars a barrel, especially as oil demand is being stoked by China and India's breakneck economic growth.

"Oil prices were higher today, with the dollar reaching fresh record lows against the euro and still coming off against other major currencies," Sucden analyst Michael Davies said.

The European single currency leapt to a historic peak above 1.48 dollars. The weakening dollar makes dollar-denominated commodities like oil cheaper for buyers armed with stronger currencies.

The market also continued to focus on the state of global energy supplies.

"Oil markets remain tight," analysts from the Commonwealth Bank of Australia said.

Despite supplies being strained ahead of the northern hemisphere winter, OPEC opted not to jack up its production quotas following a meeting in Saudi Arabia over the weekend.

The Organization of the Petroleum Exporting Countries (OPEC) has been under pressure, in particular from the United States, to boost supply to help cool prices.

However, OPEC's final declaration on Sunday after the meeting urged world peace to help stabilize prices and included a commitment to help fight global warming.

OPEC, which pumps 40 percent of global crude supplies, last decided to raise output in September when the oil producers' cartel agreed to provide an extra 500,000 barrels a day to the market, effective from November 1.

Some traders believe the ongoing weakness in the dollar will prompt OPEC to seek higher prices for oil, if not to move away from the currency all together.

"(OPEC) producers have seen their purchasing power decline with the dip in value of the greenback," said Bank of Ireland analyst Paul Harris.

OPEC has said it would hold off any discussion regarding production until its next meeting in December.

"The apparent removal of the possibility of increased supply will serve to at least underpin crude oil at these (price) levels," Harris said.

First Published: Nov 21, 2007 10:09 IST