KEY POINTS:
Oil prices rose further over the weekend on US supply concerns, the slumping greenback and mounting tensions in Pakistan and northern Iraq.
US crude traded up 59c to US$97.21 a barrel, London Brent gained 50c to US$95.28 a barrel.
A US government report on Thursday showed unexpectedly large draws in crude and distillate inventories. US crude inventories are now at their lowest level in nearly three years, adding to winter supply worries that helped push oil to nearly US$100 in November.
"Escalating geopolitical tensions, tightening oil supplies and a weakening [US] dollar would seem to stack the deck in favour of further upward movement," said Mike Fitzpatrick, vice president at MF Global.
The assassination of Pakistani opposition leader Benazir Bhutto stoked geopolitical concerns, although Pakistan is not a major crude producer and unrest is unlikely to directly affect oil flows.
"The Bhutto story will keep being a factor into [this] week, and it should help keep a floor under the market, along with the other geopolitical uncertainties," said a New York broker.
The Bhutto assassination also triggered a flight to less risky assets such as gold, which rose to a one-month high, and prompted a further drop in the US dollar.
The greenback fell again on Friday as data showing a 9 per cent decline in sales of new US homes last month heightened concern about the economy, putting the currency on track for its worst week in more than a year.
The falling US dollar has pushed up prices for commodities denominated in the US currency this year by raising the purchasing power of non-dollar nations and reducing the spending power of producer revenues.
Oil has rallied more than 58 per cent since the start of the year, hitting a record US$99.29 on November 21, although the credit crisis and forecasts for above average temperatures this winter have raised concerns about US demand.
Turkish raids on Kurdish guerrilla targets in northern Iraq have also supported prices by raising the risk to regional supply, although most of Iraq's oil exports flow via its southern ports.
- REUTERS
