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Oil near 2-1/2-year peak on Middle East, weak dollar

Oil near 2-1/2-year peak on Middle East, weak dollar

Central bankers claim no influence on oil prices but history says otherwise. Meanwhile, the Euro hits 14-month high as Libyan rebels call on NATO for more strikes.

April 6, 2011 2:38 by

Oil prices stayed near a 2-1/2 year peak on Wednesday supported by widespread unrest in the Middle East and North Africa and dollar weakness ahead of Europe’s central bank rate decision on Thursday.

Brent crude traded above $122 a barrel at 1030 GMT and US crude was at $108.20 a barrel — slightly above and below their respective Tuesday closings.

The European central bank is expected to raise interest rates by 0.25 percent on Thursday in the first hike since the 2008 financial crisis. The expectations have propelled the euro to a 14-month high while the dollar index was down 0.35 percent at 1030 GMT.

“Central bankers will always claim that they have no influence on oil prices but recent history has repetitively shown that in the new world where commodities are a global asset, central bankers can have a greater influence on oil prices than OPEC,” said Olivier Jakob from Petromatrix.

The rally in the euro took place even though Moody’s rating agency cut several Portuguese banks and the country paid higher costs at a T-bill auction.

Analysts noted that a wide return of risk appetite amid expectations of strong recovery in the United States has outweighed yet another increase in China’s interest rates on Tuesday, the fourth since October, to tame inflation.

“China is supposed to be leading the commodity complex but an increase of Chinese rates is no longer a trading input for more than a few minutes,” said Jakob.

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