Crude oil has been traded for around $109 barrel after it increased more than $2 in New York, yesterday. Investors turned to commodity markets for higher returns.
The UBS Bloomberg Constant Maturity Commodity Index increased by 1.3 percent to 14780.86 yesterday. It is up 32 percent from previous year. Investment in commodities increased more than 20 percent in the first quarter, as the investors seek a cushion against climbing inflation and a weaker U.S. currency, according to Citigroup Inc.
Robert Montefusco, a broker at Sucden (U.K.) Ltd. in London said that, “There are no signs yet of prices cracking,” further adding “The funds are pouring in and technically, things look strong. Prices have held above $100 a barrel quite well.”
There was an increase in the price of Crude oil for May delivery, as it rose to $109.16 a barrel with an increment of 7 cents, at 9:01 a.m. London time in after-hours trading on the New York Mercantile Exchange. Prices have increased by 77 percent since previous year. The futures gained 2.7 percent or $2.86, to reach $109.09 a barrel, yesterday. This was the highest close since March 18.
Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore, said that “Investment flows have been a factor in the volatility but I can't believe the new investment has taken us to $100 oil” further adding, “The fundamentals are what have gotten us here.”
According to Citigroup analysts Alan Heap and Alex Tonks, Global investments in commodities increased to $400 billion during the first three months of the year 2008. This was told in a note to clients.
Investments in commodity indexes rose by $40 billion to $185 billion, during the initial three months of the year. This was the biggest gain when compared to the complete year of 2007 according the Heaps and Tonks.
Commodities like gold, platinum and soybeans reached record prices as the dollar declined. The Federal Reserve has cut the U.S interest rates six times since September, pushing the dollar to one of the lowest levels when compared with euro.
Hirofumi Kawachi, a senior energy analyst at Mizuho Investors Securities Co. in Tokyo, said that, “Because of the devaluation of the dollar, people are trying to shift to other asset classes”.
There was a decline of 23 cents at $106.91 a barrel in Brent crude for May settlement on London’s ICE Futures Europe exchange. The contract increased by 2.1 percent or $2.24 to reach $107.14 a barrel yesterday. This was the highest close since March 14.
U.S. crude oil supplies possibly rose last week because higher imports and reduced refinery operations amongst low processing profits.
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