Tuesday August 4, 06:37 PM
Oil price hits 10-month high
LONDON (AFP) - The price of oil struck a near 10-month high here on Tuesday, helped by a recent weakening of the dollar, but analysts are warning that crude futures are unlikely to maintain their recent run higher.
Brent North Sea crude for delivery in September hit 74.36 dollars a barrel -- the highest point since October 15. In late London trade the contract showed a gain of 53 cents to 74.08 dollars from Monday's close.
New York's main contract, light sweet crude for September, fell one cent to 71.57 dollars a barrel. New York crude had on Monday hit 72.20 dollars, its highest level since late June.
"Oil pricing has been supported by forces in the financial market," said Victor Shum, senior principal at Purvin and Gertz energy consultancy.
A weak greenback is boosting oil prices because the commodity is traded in US dollars, making it cheaper for holders of stronger currencies.
The dollar has faltered owing to signs of economic improvement, traders said.
Banks are posting better-than-expected earnings and manufacturing output is rising strongly across the globe.
Some analysts are meanwhile warning that oil prices are unlikely to maintain their recent strong gains.
"The rally that we have seen since the spring has been driven mainly by hopes of a strong recovery and is likely to falter as these hopes fade," said John Higgins, an analyst with research house Capital Economics.
"Final demand is set to remain weak for years. Many commodity price forecasts still seem to be overly-influenced by the boom that started in 2004, when the world economy grew by an average of nearly five percent for four successive years.
"Those highly favourable demand conditions will not be repeated in the foreseeable future," he added.
Meanwhile crude supplies face a bleak future, a leading economist warned on Monday.
A disastrous energy crunch is looming because most of the major oil fields in the world have passed their peak production, said Fatih Birol, chief economist with Paris-based International Energy Agency.
In an interview with Britain's Independent newspaper, he added that such an "oil crunch" within the next five years could jeopardise recovery from the global recession.
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