United for Peace of Pierce County, WA - We nonviolently oppose the reliance on unilateral military actions rather than cooperative diplomacy.

"$100 is not what it used to be," Libya's oil minister said in spurning the notion of increasing OPEC's production quota on account of the price of oil reaching an all-time historic high of $103.95, exceeding, in inflation-adjustted terms, the previous all-time high reached in April 1980 during the second great "oil shock" that followed the Iranian Revolution, the Financial Times of London reported early Tuesday.[1] -- OPEC ministers meet in Vienna on Wednesday to reset production levels. -- Bloomberg News noted the weakness of the dollar as a factor: "The dollar fell yesterday to as low as $1.5275 per euro, the weakest since the European currency's debut in January 1999."[2] -- The Associated Press identified investors speculating in commodities as well as the dollar's decline as factors in the record-setting price.[3] -- Gillian Wong quoted Victor Shum, an energy analyst in Singapore, who insisted that "underlying fundamentals of oil supply and demand do not justify the price surge" and that "the price may fall sharply because it appears to be a price bubble that could potentially collapse." ...

Oil hit a record $103.95 a barrel on Monday, as the dollar plunged and expectations hardened that OPEC ministers will leave production levels unchanged when they meet in Vienna on Wednesday.

On some measures, oil closed higher in inflation-adjusted terms than its previous peak in April 1980, at the height of the second great oil shock. Then, oil prices surged to a level which equates to $103.76 a barrel in 2008 dollars.

In recent days, ministers from the Organization of the Petroleum Exporting Countries have played down the idea that record prices should force their group to raise production, blaming financial investors for pushing up prices and arguing that oil has been rising because of the falling dollar.

Shokri Ghanem, Libya’s oil minister, said as he arrived for the meeting: “The world has changed. The dollar is down. $100 is not what it used to be.”

Oil rose more than $2 a barrel to $103.95 during afternoon trading in Europe , following a closely watched manufacturing survey that suggested a weakening of the U.S. economy and triggered a further fall in the dollar. Oil and the dollar have tended to move in opposite directions because commodities are seen by some investors as a haven from weakness in the U.S.

Some OPEC members fear that oil prices will damage the world economy. Prices surging above $100 a barrel could forge a consensus for a symbolic output increase, some analysts suggest. But others, such as Iran and Venezuela, are pushing for an output cut to support the price later in the year when demand is expected to dip.

David Kirsch, of the Washington-based consultants PFC Energy, said a cut in official output seemed unlikely, as openly defending $100 a barrel could be politically damaging for OPEC.

Instead, OPEC could agree to covert cuts. Saudi Arabia, the biggest oil producer, last month produced 9.2m barrels per day -- 300,000 b/d above its official OPEC limit. The kingdom could return to that limit in coming weeks.

OIL TRADES ABOVE $102 AFTER FALLING DOLLAR SPURS COMMODITY BUYS
By Christian Schmollinger

Crude oil traded above $102 a barrel after rising to a record yesterday as the dollar fell against the euro, prompting investors to buy commodities.

Traders purchase energy and metals as an inflation hedge when the U.S. currency weakens. A U.S. Energy Department report tomorrow may show crude inventories climbed for an eighth week, according to a survey of analysts by Bloomberg News. Oil surged to $103.95 a barrel yesterday as the dollar slipped.

"The current mantra for traders is to sell the U.S. dollar and buy commodities," said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. "The rise in inventories may temporarily halt this surge to new territory every other day."

Crude oil for April delivery was at $102.24 a barrel, down 21 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:30 p.m. Singapore time.

The contract yesterday rose 61 cents, or 0.6 percent, to settle at $102.45 a barrel. Prices have gained 71 percent from a year earlier.

The dollar fell yesterday to as low as $1.5275 per euro, the weakest since the European currency's debut in January 1999. It was at $1.5190 at 2:21 p.m. Singapore time. Declines in the dollar's value make commodities priced in the U.S. currency appear undervalued.

Brent crude for April settlement was at $100.30 a barrel, down 18 cents, on London's ICE Futures Europe exchange at 2:34 p.m. Singapore time. The contract yesterday rose 38 cents to close at $100.48 after reaching a record intraday price of $102.29 a barrel.

The Organization of Petroleum Exporting Countries will make no change to their production targets when it meets tomorrow, 29 of 30 analysts polled by Bloomberg said in a survey.

"I don't think OPEC would be increasing production because we would be increasing to meet demand that doesn't exist," OPEC President Chakib Khelil told reporters in Vienna yesterday as member nations gathered before the group's meeting. Khelil is also Algeria's oil minister.

OPEC rebuffed U.S. requests to increase supply at its meetings on Feb. 1 and Dec. 5. Energy Secretary Samuel Bodman said that the group could lower prices by increasing supplies.

"The fundamentals haven't really changed since their last meeting but oil has gone up," Purvin & Gertz's Shum said. "So they are probably bewildered but happily bewildered."

U.S. crude-oil supplies probably advanced 2.4 million barrels in the week ended Feb. 29 from 308.5 million barrels, according to the median of responses by nine analysts before this week's Energy Department report. All of the analysts forecast an increase.

Oil inventories may have gained as refineries performed seasonal maintenance. Refiners typically schedule repairs and upgrades this time of year, as U.S. heating-fuel use slows and before warmer weather spurs an increase in gasoline consumption.

Supplies of distillate fuels, a category that includes heating oil and diesel, fell 1.88 million barrels from 120 million the prior week, according to the survey. Gasoline inventories declined 275,000 barrels from 232.6 million barrels a week earlier.

The Energy Department is scheduled to release its weekly report on inventories tomorrow at 10:30 a.m. in Washington.

Prices also rose on reports that the U.S. launched an air strike in Somalia and that Venezuela sent tanks to its border with Colombia.

The U.S. military launched an attack in Somalia yesterday against an al-Qaeda leader, a Pentagon spokesman said today. The spokesman, Bryan Whitman, declined to give details.

Venezuelan President Hugo Chavez's orders to close his Bogota embassy and send 10 armored battalions to the border with Colombia raise tensions beyond his previous rhetoric, to the point where miscalculation could trigger a military clash. Chavez said Colombia's March 1 air strike on a rebel camp in Ecuador risks a regional war. Venezuela and Ecuador are members of OPEC.

--To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net .

SINGAPORE -- Oil prices held steady Tuesday in Asia after blasting overnight to a record near $104 a barrel and then falling back.

Oil futures -- propelled by the weak U.S. dollar -- climbed past $103.76 a barrel Monday on the New York Mercantile Exchange, breaking what many analysts consider to be the true record high for oil after the $38 per barrel price from 1980 is adjusted for inflation.

"Every other day, we've got a new record," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "It's due to the phenomenon of investors getting into commodities, the hard assets, to find a safer haven and a hedge against inflation."

On Tuesday, light, sweet crude for April delivery lost 13 cents to $102.32 a barrel in Asian electronic trading by midday in Singapore. The contract hit $103.95 a barrel Monday before retreating to settle at $102.45, up 61 cents from the end of last week.

Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies.

"This surge in oil futures is primarily driven by the U.S. dollar's movements," Shum said. "The U.S. dollar (Monday) reached a record low against the euro in the entire history of the euro, and that has caused oil to reach a new high."

The dollar's brief decline to historic levels Monday was spurred by news that construction spending in the U.S. took its biggest nosedive in 14 years.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. Gold, copper, and wheat are among the other commodities that have rallied as the dollar has fallen.

Investors are also keeping an eye on OPEC, which meets Wednesday to consider production levels. Most expect the Organization of Petroleum Exporting Countries to hold output steady.

"It's going to be a nonevent," Shum said. "With pricing above $100, it's politically unacceptable to cut production even though fundamentals are weakening."

Analyst estimates for where oil goes from here vary widely. Some predict an eventual decline to the $65 to $70 range as supplies continue to grow and demand falls. Others see prices rising as high as $120 as investment capital continues to flow into oil.

Shum said investor demand for commodities was likely to remain strong in the near term amid expectations that further interest rate cuts by the U.S. central bank will keep the greenback from strengthening.

"Looking at the momentum, I think oil could go higher in the near term," he said.

Shum warned, though, that underlying fundamentals of oil supply and demand do not justify the price surge.

That "points to a risk that the price may fall sharply because it appears to be a price bubble that could potentially collapse," he said.

In other NYMEX trading, heating oil futures rose 0.27 cent to $2.8435 a gallon while gasoline prices dropped 0.6 cent to $2.666 a gallon.

In London, Brent crude futures fell 2 cents to $100.46 a barrel on the ICE Futures exchange.