Oil prices near $104 a barrel as dollar falls to historic low against euro - Jad Mouawad
The price of oil rose Monday to nearly $104 a barrel after the dollar fell to a historic low against the euro, setting a record and exceeding the inflation-adjusted high reached in the early 1980s during the second oil shock.The immediate catalyst for the spike in energy prices is the drop in the value of the dollar. Currency traders are selling dollars and buying euros to take advantage of the difference in interest rates between the United States and Europe. The dollar weakened, continuing its steep decline of last week, and the euro rose to a record $1.5274 in early New York trading. The dollar also fell to its lowest level in three years versus the yen."The question for oil is where is the dollar going," said Roger Diwan, a managing director at PFC Energy, a consulting firm in Washington. "That's going to be the main market mover in the short term." Since 2000, oil prices have more than quadrupled as strong growth in demand from the United States and Asia outstripped the ability of oil producers to increase their output.
The Saudi Arabian oil minister, Ali Al-Naimi, said crude prices were unlikely to fall below $60 a barrel because the cost of developing alternative fuels, like tar sands, is rising. "Therefore, a line has been drawn below which the price cannot fall," Naimi said during an interview which was published over the weekend by Petrostrategies, a Paris-based industry newsletter.
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