(Xinhua)
Updated: 2008-03-13 13:43

VIENNA -- Oil hovered around a record high of 110 US dollars a barrel Wednesday with a tumbling US dollar, fund flows and OPEC's reluctance to pump extra crude providing support.

Oil prices jumped from less than dollars 70 to over 110 dollars, due to geopolitical crisis and speculations since the middle of last year and repeated hitting of record highs.

Experts regarded the geopolitical crisis in the Middle East and the speculations which caused by the weak dollars as main reasons.

Venezuela's Energy Minister Rafael Ramirez said Tuesday that the market had enough oil and the OPEC Conference also pointed out that the current prices could not reflect the fundamental market.

Since the second half of last year, the United States promoted a new tougher economic sanctions against Iran and even hinted the military possibility, which aroused strong reactions from Iran.

The market fears possible conflicts between the US and Iran might lead to the oil supply disruption.

Meanwhile, the armed conflicts between Turkey and the Kurds in northern Iraq nerved the crude oil market. Iraq's oil city Kirkuk, which lies in the border areas with Turkey, is the primary residence area of Kurdish and one of the most important channels of oil export from Iraq as well.

The African largest oil exporter Nigeria's oil bases suffered continuous armed attacks, which became a political push to the prices.

Current high oil prices also were also caused by market speculations. The rapid devaluation of US dollars sharpened the speculations of international capital into the crude oil and other commodity markets.

The exchange rate of the US dollar to other major currencies kept dropping. The exchange rate of the Euro to the dollar broke the historic high of 1.55 Wednesday.

Currency expert of HFIX PIc, Gareth Sylester said, "all indications show the economic decline of the United States, the currency investors will be certainly reluctant to face the risk of holding dollars."

The devaluation of dollars pushed up the oil prices, which quoted by the dollar. Emoson, the energy security analyst in Massachusetts said: "the crude oil market has completely been out of the control of demand and supply."

Investors turned to commodity markets due to the weak dollar, which caused the continuous price rising of energy and metal products.

Currency experts asserted that the devaluation of the dollar would not stop until the middle of this year. Some oil experts therefore believed that the rising oil prices would maintain the strong trend in the near run.

OPEC president, Algeria's Oil Minister Chakib Khelil, said that the international oil prices of this year would stay in current high. He expected to ease the tension with the end of the presidential election in the US and the restoration of the dollar's exchange rate in 2009.

Facing with the soaring prices, OPEC did not reconsider its output. Before the day of oil prices surpassing the 100 dollar threshold, Venezuela's Oil Minister Rafael Ramirez said that OPEC would not increase the output to curb the prices.

He also said that the "basic price" of oil should be about 80 dollars, and the economic situation of the US "is one of the main issues in the OPEC conference."