Oil price rockets to $92 a barrel, gold at 28-yr highs

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SINGAPORE, Oct 26: US oil prices and Brent crude rocketed to all-time highs on Friday on a record-low dollar, tensions in the Middle East and worries over energy supply shortages ahead of the northern hemisphere's winter. US crude for December jumped to a record-peak of $92.22 a barrel, and was at $91.69 at 0745 GMT, up $1.23 from Thursday's close and about 50 percent from the start of the year, reports Reuters.
But US crude is still below the inflation-adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution.
London Brent crude also hit a fresh all-time high of $89.30. Rising global crude oil demand, especially from top consumers the United States and rapidly growing China, has driven oil's current rally, helped by a low dollar and investment flows from pension and hedge funds into commodities and oil.
Fears of a supply crunch have helped the surge. Producer cartel OPEC has signalled it is unlikely to boost supply further and political tensions in the Middle East have increased investors' worries that some output could be disrupted.
Higher prices have so far had a limited impact on economic growth and demand. Only concerns that a US housing slump may crimp economic growth could weigh on the rally in oil prices, and signs are emerging of a slowdown in China's demand growth.
In anticipation that the US Federal Reserve may cut interest rates next week, the US dollar hit fresh record lows against the euro and a basket of currencies on Friday. The weak dollar fuels oil buying as investors view dollar assets as relatively cheap.
The United States slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction, but Russia said such moves only forced Tehran into a corner over its nuclear programme.
Oil, which was falling at the start of the week on concerns about the strength of the US economy, has rallied since US data on Wednesday showed a larger-than-expected 5.3-million barrel drawdown in US crude inventories.
"With all the bullish news flow in the market, I think there is potential for oil to rise further for the rest of the day and in the near term," said David Moore, an analyst at the Commonwealth Bank of Australia.
Exacerbating fears of a possible supply crunch, OPEC's Secretary General Abdullah al-Badri said world oil markets were well supplied, while dollar weakness and a flood of speculative investment had helped push prices up to record levels. Al-Badri added that $90 a barrel oil was not bringing a windfall to OPEC, which is investing in new production and seeing revenues eroded by the weak dollar.
Energy officials from OPEC nations Venezuela and Algeria said the producer group would not boost output when it meets informally in Saudi Arabia next month.
Simmering tensions between Turkey and Kurdish rebels in northern Iraq also heightened fears that crude supplies from Iraq would be disrupted should Turkish forces launch an attack.
President Abdullah Gul warned Kurdish rebels on Thursday that Turkey's patience was running out after Turkish forces said they had repelled a guerrilla attack near the Iraqi border.
According to an Internet report, gold rallied to fresh 28-year highs as oil prices rose to new record levels, stoking inflation fears and safe haven buying in gold, and as the dollar hit another record low against the euro earlier.
The US currency is coming under increasing pressure from speculation the Federal Reserve will cut interest rates next week in a bid to prop up the ailing economy.
A weak dollar tends to benefit gold as the metal is seen as an alternative asset to the US currency. On the other hand, rising oil prices boost bullion as they increase its appeal as a hedge against inflation.
Gold has hit a series of fresh 28-year high for more than a month now.
Analysts say while the speed of its ascent means there is a risk of a near term pull back in prices, the metal remains set to test the 800 usd level longer term.
Elsewhere, gold's rally boosted silver to an eight-month high of 14.12 usd an ounce earlier this morning. It was quoted at 14.05 usd against 13.86 usd in mid-morning trades.
Platinum was up at 1,450 usd against 1,443 usd, still underpinned by mine closures in South Africa, the world's largest platinum producer. Last week, the metal hit an all-time high of 1,457.50 usd an ounce.
Palladium was trading up at 368 usd an ounce against 364 usd.