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The price of oil has reached a new record high, a day after setting a previous
record.
US sweet crude traded at $102 a barrel, after climbing to $101.43 a barrel on
Tuesday.
Traders said the dollar's fall against the euro was the biggest catalyst as it
makes oil attractive for non-dollar denominated currencies.
Concerns that the producers' cartel Opec will cut supply when they meet next
week have also been blamed.
Commodities are generally considered a hedge against inflation... we are
therefore seeing these strong prices that have really little to do with oil
market fundamentals
Victor Shum, energy analyst
The euro hit a high of $1.50 on Tuesday after traders bet that the Federal
Reserve will have to cut rates below 3% to prevent the US economy from sinking
into a recession.
US interest rate cuts generally lower the value of the dollar as traders move
to other investments with a higher rate of return.
Trend buying?
Investors are also ploughing money into commodities and metals at the moment
which are seen as a safer bet than equities and currencies in times of
financial and economic uncertainty.
Gold, platinum and wheat prices have all been reaching records on an almost
daily basis, while speculative buying has also affected the oil price. London
Brent crude was trading near $100 a barrel after surpassing that level on
Tuesday.
"The US dollar weakened against the euro and the economic data also indicated
that inflation in the US rose in January," said Victor Shum, an energy analyst
with Purvin & Gertz in Singapore.
"Commodities are generally considered a hedge against inflation. We are
therefore seeing these strong prices that have really little to do with oil
market fundamentals."
A raft of gloomy US economic data out on Tuesday included lower consumer
confidence and higher home foreclosures.