(Recasts after US Fed move, updates prices)
Updates prices)
By Jane Merriman
LONDON, March 11 (Reuters) - Oil stepped back from record
highs near $110 a barrel on Tuesday as the U.S. dollar rallied
after the Federal Reserve and other central banks unveiled a
coordinated action to inject liquidity into financial markets.
U.S. light crude for April delivery <CLc1> was 16 cents
higher to $108.06 a barrel by 1330 GMT, after it touched a
record $109.72 a barrel -- the fifth straight day of new
records.
London Brent crude <LCOc1> was up 37 cents at $104.53, off
its record high of $105.82.
"Oil is definitely reacting to the reversal of the dollar,"
said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
"On coordinated central bank liquidity action."
The U.S. Federal Reserve announced a new effort with other
central banks to add up to $200 billion to strained credit
markets, boosting stocks and helping the dollar rally.
The Fed said it was expanding a securities lending programme
and will accept a broader base of securities as collateral,
including many mortgage bonds whose value has declined as the
housing bubble burst.
The dollar rose nearly a full yen, and trimmed its losses
against the euro.
The euro rallied to an all-time high against the struggling
U.S. dollar [] earlier on Tuesday, anticipating more
interest cuts by the Federal Reserve to boost the flagging
economy in the United States, the world's top energy consumer.
AN ERA OF HIGHER PRICES
Oil prices had dipped slightly after the International
Energy Agency said world oil demand would be less than expected
this year because of slower economic growth in industrialised
countries and record prices.
But the agency also said only a severe recession would push
oil back below $60 a barrel.
"We are in an era of higher oil prices and so if we look at
$100 oil we have to do so with an understanding that prices are
unlikely to return to levels seen in the early part of the
decade," said the IEA, which advises 27 industrialised
countries. [].
Oil has set a string of record highs as a bullish long-term
supply outlook for oil and other commodities has continued to
suck in investment flows looking for alternatives to equities
and bonds that are overshadowed by the credit market crises and
fears of a U.S. slowdown.
"Looking at the big picture, we believe that the recent
price surges in the commodity sector have been for the most part
triggered by large capital inflows from institutional investors,
hedge funds above all," said fund manager Tiberius Asset
Management in a research note.
Goldman Sachs warned oil was at risk from substantial fund
liquidation due to cyclical fundamental weaknesses in the next
few months, but the investment bank remains constructive on
energy for the long-term.
"We believe that the combination of low economic growth in
the United States and high oil price inflation will have its
strongest impact on demand in the first half of the year," the
investment bank said in a research note. []
The latest update on fuel supplies in the United States, due
on Wednesday, is forecast to show a 1.9 million barrel rise in
crude oil inventories last week, according to a preliminary
Reuters poll. []
(Additional reporting by Baizhen Chuam; editing by James
Jukwey)
