May
12
The weaker US dollar prompted investors to continue to buy commodities increased fighting in Beirut added to concerns of the Middle East. These two forces increased the price of crude oil to near $126 a barrel last Friday. Many investors have started to buy commodities as an inflation hedge.
Previously oil surged to $78.40 per barrel on July 14, 2006 Israel attacked Hezbollah forces in southern Lebanon. Libya’s oil official last week blamed speculation as well as political conflicts for driving oil prices higher. He expects OPEC to have an early review of their output as OPEC pumps about 40% of the world’s oil. Furthermore, decreased business confidence in Germany and France which account for about half of the euro region economy have led to renewed speculation that the European Central Bank will reduce interest rates yet again this year. With lower rates of lending increased inflation will be seen in the euro zone. This could also increase the prices of commodities.
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