Oil price hits new high for 2009

The price of oil has reached a new high for 2009, continuing its recent rise on the back of the weak US dollar and strong US company results.

• US crude rose 52 cents to $79.05 a barrel in early trading, before slipping back to $78.78, up 25 cents on Friday’s close.
• London Brent also traded higher, up 22 cents at $77.11 a barrel.
• Oil prices surged last week, as encouraging US bank results fuelled optimism for the global economy.
• ‘Massive surplus’
• Analysts said the short-term direction of the oil price would depend on the dollar and the next round of corporate results out this week.
• “Oil prices are now trading at very high levels considering the fact that we’re still seeing very high stockpiles in the US,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
• “Crude may trade sideways today, getting direction from the US dollar and the equities market.”
• The dollar lost more ground against the euro in early trading, falling to $1.4936.
• “The spectacular gains were overwhelmingly driven by financials and market optimism rather than fundamentals,” according to analysts at the energy consultancy JBC Energy.
• They believe the price of oil is more likely to drop back rather than move higher once fundamental factors re-establish themselves as the main driver of the oil price.
• These factors include spare capacity, low profit margins for refiners, a “massive stock surplus” of products such as diesel and heating oil, and lacklustre demand among industrialised nations, JBC argued.
• “We see no reason why prices should not return to the $65-$75 per barrel bandwidth.”