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oil jumps to record high on supply concerns

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    Oil jumps to record high on supply concerns
    Email Print Normal font Large font AdvertisementFebruary 29, 2008 - 8:02AM

    Oil vaulted more than 3% a barrel on Thursday to an all-time peak near $US103 -- eclipsing the previous inflation-adjusted high set 28 years ago -- after a fire hit a major European natural gas terminal and the US dollar fell to a record low.

    The surge could add pressure on oil cartel OPEC to boost production when it meets in Vienna next week, though members have said they see no shortage of supply in the world market and are unlikely to raise output.

    US crude surged $US2.95 to settle at $US102.59 a barrel after hitting $US102.97, shattering the inflation-adjusted high of $US102.53 reached in 1980, a year after the Iranian revolution. London Brent crude gained $US2.63 at $US100.90 a barrel after the European benchmark hit a record $US101.24.

    ``Speculators own this market, and they are pushing it up as they see fit,'' said Stephen Schork, editor of energy newsletter the Schork Report.

    The gains come amid a broad-based commodities rally fueled in part by expectations the US Federal Reserve will continue to aggressively cut interest rates to battle an economic slowdown in the world's biggest energy consumer, speeding up the rate of inflation.

    ``The energy complex is a dollar/inflation story as investors have moved into commodities as a hedge against inflation,'' said Nauman Barakat, senior vice president at Macquarie Futures USA.

    Oil extended its gains late Thursday after a fire at the Bacton Gas Shell terminal in Norfolk, England, shut over 45 million cubic meters per day of gas supplies, about 13% of the UK national grid's forecast demand.

    ``I understand that this fire at the UK natural gas terminal is creating a strong push in the European market, and that is translating here,'' said Tim Evans, energy analyst at Citigroup Futures Research.

    Shell said the fire had been extinguished and the plant had been shut down safely. The Interconnector natural gas pipeline, which links Europe with the United Kingdom, had not been affected by the blaze, a spokesman said.

    Economy, OPEC

    Federal Reserve Chairman Ben Bernanke said the United States would avoid a 1970s-style period of ``stagflation'' but acknowledged global price pressures could complicate central bank efforts to lift the economy.

    The US dollar dropped to an all-time low versus the euro after Bernanke's testimony did nothing to dispel expectations that interest rates are headed lower. Prices of dollar-denominated commodities tend to rise when the currency weakens.

    Also, the latest estimate of US fourth-quarter gross domestic product came in weaker than analysts had forecast, and a report showed a big jump in initial weekly jobless claims.

    Venezuelan Oil Minister Rafael Ramirez said there was no need for OPEC to increase production. The head of Libya's OPEC delegation Shokri Ghanem said earlier that the cartel most likely will leave output steady.

    US Energy Secretary Sam Bodman reiterated calls for OPEC to open the taps as consumers struggle with high oil costs, the mortgage crisis and the credit crunch.

    OPEC ministers say prices are rising on speculative buying, and insist global supplies are ample to cover demand.
    US crude oil stocks rose for the seventh straight week last week, according to US government data released Wednesday, while gasoline stocks are at 14-year highs.

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