Singapore: Oil hit a new high above $115 a barrel on Thursday as the dollar's extended slump and a big fall in U.S. gasoline stockpiles just weeks ahead of the summer driving season attracted fresh fund buying.
US crude for May delivery dipped one cent to $114.92 a barrel by 0159 GMT after having hit $115.21 a barrel in early electronic trade, its third consecutive high.
Prices gained $1.14 on Wednesday, taking this year's gains to near 20 per cent. London Brent crude rose 4 cents to $112.70 a barrel, off a record intraday high of $112.83.
Oil prices have extended a five-year rally this year as investors seek out commodities as a hedge against inflation and bet that fast-growing oil demand in Asia and the Middle East will help compensate for a weakening US economy.
"The fall in US gasoline stocks and a weak dollar are the reasons for prices rising, but it's a contradiction. The US economy is slowing down and gasoline demand is not growing," said Gerard Rigby of Fuel First Consulting in Sydney.
US government data showed a surprisingly big 5.5 million barrel fall in gasoline stocks in the week to April 11 as poor economics pushed refineries to go slow on output. Crude oil stocks fell 2.3 million barrels to 313.7 million barrels despite lower US processing rates that dropped 1.6 percentage points to 81.4 per cent of capacity, the lowest level since the week ending October 21, 2005.
The US Energy Information Administration expects high retail gasoline prices to cut summer gasoline demand by 36,000 barrels per day this year, the first year gasoline demand is expected to decline in the summer since 1991.
"Although the inventory situation in the U.S. is not desperate for either crude oil or refined products, the inventory draws were merely spice in an otherwise U.S. dollar-driven foreign exchange pricing frenzy for crude oil," said Martin King from First Energy, in a report.
The dollar plummeted to lifetime lows against the Euro on Wednesday, as a steep decline in US home construction and record high Euro zone inflation underscored the contrasting growth paths of the two economies. Although US oil consumers appear to be feeling the effect of higher prices and a gloomier economic outlook, demand from China is running strong with top refiners set to extend unusually high diesel imports into a sixth straight month.
PetroChina, the No 2 refiner, has bought 300,000 tonnes of gas oil for May after Beijing extended an import tax break into the second quarter, traders say. And growth in refining run rates in China remained strong in March at 6.8 percent, data showed on Thursday.
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