Crude oil reaches $103.05 record high on dollar drop, UK gas terminal fire

Crude oil climbed to a record for a fourth day after the dollar dropped to an all-time low against the euro, extending a three-day rout and prompting investors to buy commodities as an inflation hedge. Increased investor demand for oil coincided with reports of lower Nigerian production, a disruption to supply from Iraq and a fire at a U.K. gas terminal.

Crude oil for April delivery rose 46 cents to $103.05 a barrel in after-hours electronic trading on the New York Mercantile Exchange, the highest since trading began in 1983. The dollar traded at $1.5182 per euro at 9:29 a.m. in Singapore, after touching $1.5229 yesterday, the weakest since the euro began trading at about $1.17 in January 1999.

U.K. natural gas prices are likely to rise after an explosion and fire yesterday damaged Royal Dutch Shell Plc's Bacton terminal in England, which handles supplies flowing from the North Sea into Europe's biggest gas-consuming country. Natural gas for April delivery yesterday rose 38.3 cents to $9.443 per million British thermal units in New York. Futures touched $9.498, the highest since Feb. 1, 2006.

- Oil and gold seem locked in a neck-to-neck race to outdo each other at breaking records. An interesting note is that the news media can no longer say that oil is "still below" the $102.53 "inflation-adjusted high" back in 1980, because it is now way above that.

India needs $500 billion spending on infrastructure

bloomberg.com :

India needs to nearly double spending on roads, ports, power and other infrastructure over the next five years to end blackouts, ease congestion for the movement of goods and people and sustain record economic growth. Infrastructure spending may increase to 9% of gross domestic product [GDP], or $500 billion, in the five years ending March 31, 2012, from about 5% now, the Economic Survey, a finance ministry report, said.

The South Asian nation needs to raise spending to sustain a targeted 9% annual growth rate for the next five years. Congested ports and roads and power shortages add to the cost of operations for companies and shave off 2 percentage points from growth in Asia's third-largest economy. India needs as much as $1.6 trillion for infrastructure in the next 10 years, or about 10.5 - 12% of its GDP, to maintain the current pace of growth, Rajat Nag, managing director general of the ADB, said Dec. 3 [2007].

- You could invest in this theme via an infrastructure fund such as the First State Global Infrastructure Fund. My preferred way is to invest in the commodities that all this infrastructure-building will need - including base metals such as iron, copper and so on, and the energy needed to run the machinery - crude oil, natural gas and uranium.

(2008-02-29 13:53:28 SGT) [Biz] Permalink

South Africa inflation unexpectedly accelerated to 8.8% in Jan 2008

bloomberg.com :

South African inflation unexpectedly accelerated in January [2008], exceeding 8% for a second month and keeping pressure on the central bank to leave interest rates at a four-year high. The CPIX inflation rate, which excludes mortgage costs, rose to an annual 8.8%, from 8.6% in December, Pretoria-based Statistics South Africa said. The headline [CPI] inflation rate, which includes mortgage costs, rose to 9.3% last month from 9% in December. Inflation has exceeded the central bank's 3-6% target range since April, prompting the central bank to raise the benchmark interest rate four times last year to 11%.

Rising food prices, which make up a quarter of the consumer price index, have added to inflation. The price of white corn, a staple in South Africa, climbed 8.9% in the second half of last year, boosted by drought and higher international grain prices. Crude oil surged 47% in New York in the same period.

- Yet another example of the inflation that is taking off exponentially worldwide.

(2008-02-29 13:08:44 SGT) [Biz] Permalink

Russia quietly prepares to switch some oil trading from dollars to rubles

iht.com :

Russia, the world's second-largest oil-exporting nation after Saudi Arabia, has been quietly preparing to switch trading in Russian Ural Blend oil, the country's primary export, from the dollar to the ruble. The Russian effort began modestly this month [Feb 2008], with trading in refined products for the domestic market. Private brokers will be allowed to trade in March; futures contracts will be introduced in April. The effort to squeeze the dollar out of Russian oil sales marks another project with swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and in former Soviet states.

Oil trading is now nearly always denominated in dollars, the de facto common currency of the petroleum business. As a result, companies and countries that buy petroleum products are encouraged to hold dollar reserves to pay for their supplies, helping the American economy support its trade deficit. Russia would like to change this practice, at least among its customers, as a means to elevate the importance of the ruble, a new source of national pride after gaining 30% against the dollar during the current oil boom. A move away from the dollar, meanwhile, is more glum news for the United States.

A new glass-and-marble home for a ruble-denominated commodity exchange is rising this spring in a prestigious district in St. Petersburg. Viktor Nikolayev, the director of the St. Petersburg exchange, said no timeline had been established for trading for export on the exchange, which also handles grain, sugar, mineral fertilizer, cement and esoteric financial products like Russian government quotas for beef and pork imports - all in rubles. "We are in Russia, and the currency is rubles, not euros, not dollars," he said. "We don't want to depend on the rise or fall of the dollar."

Other oil-exporting countries, too, are chafing at dealing in the weakening dollar. Iran, one of the largest oil-exporting nations, and no friend of the United States, has since 2005 striven to open a commodity exchange to trade oil in currencies other than the dollar. Iran's ambassador to Russia, discussing the two countries' interest in the idea, said Iran might choose rubles to free his country from "dollar slavery."

- The US dollar is going to weaken further as the world is running instead of walking away from it. The euro is now at 1.518 (EUR/USD), and gold is continuing to smash through all records and is currently at $972.40 per ounce at the time of writing. The US Dollar Index, USDX, a weighted average of the USD versus a basket of other major currencies, has broken through all support levels including 76, 75 and 74 and is now at 73.796.