Mark Milner and Larry Elliott
August 22, 2008
The price of oil jumped by more than $6 a barrel yesterday, as a sliding dollar and anxiety about a new cold war between Russia and the west prompted investors to buy commodities.
Reversing part of the decline in crude since its record high of $147 a barrel early last month, oil pushed back above $120 a barrel in morning trading in New York.
Moscow’s frosty reaction to the signing of a deal between the United States and Poland to set up part of a US missile defence shield was cited by analysts as one factor behind the jump in oil, with the dollar’s biggest fall against the euro in six weeks and concern that tropical storm Fay could re-enter the Gulf of Mexico also helping to drive prices up.
“Crude is rallying as the dollar is down and there’s this ongoing geopolitical tension between Russia and the west,” said Kyle Cooper, director of research at IAF in Houston. After threatening to drop below $110 a barrel last week, the possibility that Moscow would limit supplies of energy through its pipelines to the west has driven up the cost of crude.
On the foreign exchanges, the dollar was affected by the problems of US mortgage firms Freddie Mac and Fannie Mae.
Other commodities followed oil’s lead. Gold rose above $800 an ounce while British wholesale gas prices hit a new record yesterday, driven by the rise in the oil price and Wednesday’s closure of the Kvitebjørn field after a gas leak in the pipeline connecting it to the processing plant.