Dubai Oil Rises to All-time High

The Dubai oil price set a new record high as the international oil price, stabilized since last October, is showing signs of another hike.

The trend may take a heavy toll on South Korean industries since Dubai oil represents 78 percent of the country`s total oil import volume.

According to the Korea National Oil Corporation (KNOC), the Dubai oil price rose $0.69 to close at $42.68 per barrel on February 28, $0.43 higher than the previous all-time high of $42.25 set in November 24, 1980 during the second oil shock.

West Texas Intermediate (WTI) and Brent oil rose $0.66 and $0.25 to close at $51.66 and $49.95, respectively, the highest level this year.

The spot prices gap between WTI and Brent oil, once at more than $15 at the end of 2004, is now at $8.98.

Recent forecast that cold weather may continue in the northeastern U.S. and an inflow of hedge funds to oil markets are said to explain the sudden oil price hike.

The large volume of hedge funds is now entering the oil futures markets as the continued dollar devaluation has caused the loss of investors` confidence.

As the official currency of oil trading, the dollar`s continued depreciation moves Organization of Petroleum Exporting Countries (OPEC) member countries, in an attempt to avoid actual asset devaluation, to limit oil production.

A KNOC official said, "An upcoming OPEC general meeting on March 16 will be significant since member countries might decide to lower oil production quotas."

Chang-Won Kim changkim@donga.com