Oil Hitting Record Highs
Oil prices are hitting new highs and seem to be sitting comfortably above the $125-a-barrel watershed.
US Light Crude hit a record high of $139.12 on Friday 6th June, while Brent Crude also found an all-time peak at $138.12. Since March US Light Crude has risen by more than $35 a barrel. Oil’s consistent performance of late is largely due to the weakened dollar, which has pushed many investors towards commodities. However, oil’s spiking prices are also a result of supply problems in the US, Russia, Mexico and Nigeria, coupled with OPEC’s recent statement that it would not be raising output. The President of OPEC has even warned that US$200 a barrel is not out of the question.
The soaring oil prices are causing headaches for motorists, with petrol hitting $1.60 a litre in many parts of Australia. The rising oil prices are pushing inflation rates to levels not seen since 1991, keeping them above the Reserve Bank’s inflation target. It is proving to be a difficult issue for all major central banks around the world as they try and balance slower growth with inflation pressures. The easing demand from the developed world for crude has been more than made up for from the emerging economies such as China and India.
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The above comments do not constitute investment advice and IG Markets accepts no responsibility for any use that may be made of them.
Updated: 10 June 2008