Crude oil surged to a record high of US$90.02 a barrel before
dropping back to $89.28 on Friday, largely driven by a widening
supply gap and further weakening of the US dollar.
Gold also hit a record high of US$776.9 per ounce on Friday
after rising 4.1 percent over the past week.
The most actively traded crude oil futures contracts for
delivery in November on the New York Mercantile Exchange surged 10
percent from last Wednesday to US$89.28 on Friday.
In Shanghai, the price of fuel oil futures contracts traded on
the Shanghai Futures Exchange (SHFE) also climbed 2.8 percent over
the past week. Prices of fuel oil futures for delivery in November
on the SHFE rose 0.51 percent to close at 3,723 yuan per ton.
Analysts said supply and demand fundamentals are also lending
support to the oil price rise. "When the market is confronted with
tightened supply, investors become more vulnerable to worldwide
economic and political uncertainties - like the geopolitical
threats in the Middle East and the declining US dollar," said Lin
Hui, an analyst at a futures company of Orient Securities.
Meanwhile, on the Shanghai Gold Exchange, the most actively
traded gold product Au9995 closed at 185.44 yuan per gram on
Friday, after surging 2.3 percent in the past week.
Wang Lixin, general manager of the World Gold Council Greater
China, said uncertainties hanging over world economic growth
triggered by the US subprime mortgage crisis have forced investors
to seek refuge in gold.
"An increasing number of investors are buying gold to hedge
against risks amid expected further devaluation of the US dollar,"
said Wang.
The US Federal Reserve's interest rate cut last month, which
could drive down the value of the US dollar even further against
other major currencies, is widely seen to have spurred investors to
rush into commodity markets in anticipation of an upswing in energy
and precious metal prices.
Expectation of continuous price rises has reportedly attracted
sizable hedge fund investment in the oil and gold futures
markets.
Analysts said the continuous drop in world oil inventories would
drive oil prices to even higher levels in the next few months,
especially with demand for heating oil increasing as winter
approaches in the northern hemisphere.
Goldman Sachs predicts global oil inventories could reach
critically low levels this year. Statistics compiled by the US
investment bank show that the petroleum inventories of the
Organization for Economic Cooperation and Development showed a draw
of more than 27 million barrels in September.
This draw, combined with a 21-million barrel counter-seasonal
stock draw in August reported by the International Energy Agency,
indicates a third-quarter inventory draw of over 33 million barrels
- a sharp contrast to the average 24 million barrels in the third
quarter over the past 10 years.
Meanwhile, the monthly report released on Monday by the
Organization of Petroleum Exporting Countries showed that daily
world demand for crude oil averaged at 85 million barrels, up 1.52
percent from the same period last year.
(China Daily October 20, 2007)
