Oil Surges to Record High Near $140
June 16th, 2008I guess the Saudis should have said that they were going to buy dollars instead.
Via: Reuters:
Oil surged to a new record high on Monday of nearly $140 a barrel, propelled by weakness in the U.S. dollar which offset the bearish impact of plans by Saudi Arabia to boost output.
U.S. light, sweet crude for July delivery was up $3.74 at $138.60 a barrel by 2:17 p.m., after falling as much as $1.40 a barrel, or about 1 percent, earlier in the session.
U.S. crude set a record high of $139.89 a barrel.
London Brent crude was up $3.05 at $138.16.
Prices leapt as the dollar fell after publication of data from the New York Federal Reserve that showed manufacturing in the state of New York contracted in June for the fourth time in five months.
“Prices rose sharply in three minutes. U.S. manufacturing data was weak, so it is pressuring the dollar down,” said Mike Wittner, energy analyst at Societe General.
Earlier in the session prices had dropped back after United Nations chief Ban Ki-moon said over the weekend that Saudi Arabia, the world’s biggest oil exporter, was set to increase output to 9.7 million barrels per day in July, its second supply boost in as many months.
That would be a rise of 550,000 bpd or over 6 percent since May and would take Saudi output to its highest monthly rate since August 1981, according to U.S. government data.
Saudi plans emerged ahead of a meeting of oil producers and consumers on June 22 to find a solution to record oil prices that have caused consumer protests in Asia and Europe.
I guess the Saudis should have said that they were going to buy dollars instead.
More likely than not, they have bought all they can financially and economically stand to buy, as have all of the USA’s wealthier client-states.
Since oil is purchased in dollars, in one sense you can say that the Saudis are buying dollars -paid for in oil. I think what happened was a) the Saudis have a long history of saying they will increase production and then failing to do so, and b) traders finally realized that 200,000 barrels a day is a drop in the bucket when the world uses 84 million barrels a day.