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Oil extends records to near 106 dollars after New York explosion

LONDON - Record-breaking oil prices spiked close to 106 dollars on Thursday after the market was rattled by news of a small explosion in New York and following a surprise fall US crude stockpiles.

New York’s main oil contract, light sweet crude for delivery in April hit 105.96 dollars per barrel, extending gains above 105 dollars after topping the previous record of 104.95 dollars set on Wednesday.

Brent North Sea crude for April jumped to 102.95 dollars, beating its previous all-time peak of 102.29 dollars set on Monday.

Police cordoned off a section of New York’s Times Square early Thursday after a small explosion struck near a military recruiting station, officials said.

‘The spike (in prices) may have been a bullish, knee-jerk reaction to that (news),’ said Societe Generale analyst Mike Wittner.

A New York Police Department spokesman said only that there had been a minor explosion, that there were no injuries and that police were investigating the cause of the blast. He said he did not know if the explosion was man-made.

A man on a bicycle is believed to have thrown a ‘small incendiary device’ at a police officer, according to a local Eyewitness News report.

Local reports said the explosion came at around 4:00 am (0900 GMT) and that subway services to the square, one of the city’s main transport hubs, had been suspended, although officials were not immediately available to confirm this.

Before news of the explosion, the market was already well supported by figures showing lower US crude reserves and the plunging dollar.

The US Department of Energy said Wednesday that American crude inventories tumbled 3.1 million barrels last week, marking the first weekly drop for one and a half months.

The news shook the market which had been expecting a gain of 2.4 million barrels and sent New York crude spiking close to 105 dollars on Wednesday.

Meanwhile Thursday, the euro hit a record high 1.5347 dollars.

Dollar-priced raw materials like oil tend to gain from the weak US unit because a fall in the dollar makes them cheaper for buyers using other, stronger currencies.

Oil was also pressured after the OPEC crude exporters’ cartel decided Wednesday to maintain current output levels despite calls from the West for a hike to help dampen runaway prices that threaten economic growth.

In announcing it would maintain daily production at the current level of 29.67 million barrels, OPEC said the market was ‘well-supplied’-a sentiment not fully shared by traders.

‘The truth of the matter is there is not a lot of supply in the supply chain,’ said Justin Wilks, director of trading and operations at Global Commodities fund group in Australia.

With prices over 100 dollars, Wilks said: ‘I would suggest that we would have to get used to it.’