LONDON (Reuters) – Oil rose above $99 a barrel on Monday, closing in on the $100 milestone, as the dollar edged back towards last week’s record lows and despite hopes an OPEC meeting next week could signal an output boost.
Iran’s Oil Minister Gholamhossein Nozari said at the weekend that some OPEC members were advocating an increase in production when they meet on December 5 in Abu Dhabi to debate whether to raise output for a second time this year.
U.S. light, sweet crude for January delivery stood 82 cents higher at $99.01 by 5:08 a.m. EST, within striking distance of the all-time high of $99.29 from last Wednesday.
London Brent crude was 73 cents higher at $96.49, after hitting a new record high of $96.55 earlier in the session.
The dollar’s decline to a series of record lows versus the euro — the latest on Friday — has spurred buying across commodities, notably oil.
The dollar edged back towards last week’s record troughs versus the euro on Monday as investors saw little reason to change their bearish view on the U.S. economy or expectations of more Federal Reserve interest rate cuts.
“The questions are: where does the U.S. dollar go, and are we going to see more demand out of the U.S. as it starts to get cooler,” said Peter MacGuire, managing director of Commodity Warrants Australia in Sydney.
The onset of colder weather in the U.S. Northeast, a major consumer of heating oil for household use, has also aided the upswing in prices as traders bet higher demand will strain inventories that remain below seasonal norms.
Temperatures in the region on Monday were near their norms for this time of year, according to The Weather Channel Web site (www.weather.com), but the U.S. National Weather Center’s six to 10-day outlook calls for colder-than-usual conditions.
Iranian minister Nozari said opinion among OPEC ministers regarding an output boost was divided. “Some countries agree with output increase and others believe there is a good balance between oil supply and demand,” he told a news conference.
The previous 500,000 barrel per day (bpd) increase, agreed in September, has failed to stem oil’s more than 40 percent gain since mid-August, and some traders are betting on more oil.
“I think the market will remain strong and will keep trying to touch the $100 mark this week, so I think OPEC will have to increase production in December,” said Ken Hasegawa, commodity derivatives sales manager of Fimat Japan Inc.
Most members have said publicly that they don’t believe more oil is needed, or that an increase would not cool prices.
The United States has urged OPEC to boost production because of shrinking oil inventory levels in developed economies and to help bring down prices that have surged to record levels.