Tech & Biz

Oil rises to $116 on Russia-US tension

by Sanjay Jha | August 21, 2008 at 01:47 am

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After falling from its record peak of $147.27 a barrel last month, Price of crude oil has shot up again. Price of crude have been steadily gaining from below $20 in early 2002. Price rise was fueled by growing demand and OPEC's failure to increase supply. But Price rise seems to happening again.

Oil rose to $116 a barrel on Thursday, climbing for a third straight session, as Washington's missile shield deal with Poland angered Russia, adding to international tension.

The spat adds to political factors that has supported Oil Prices in recent months, such as the dispute over Iran's nuclear work.

A weaker dollar also boosted the appeal of commodities as an inflation hedge. "There's a myriad of geopolitical factors rumbling in the background -- Russia, Iran," said Tony Machacek, broker at Bache Commodities Ltd.

"Also, the dollar is weaker." U.S. crude gained 66 cents to $116.22 a barrel by 0851 GMT, having risen as high as $117.00 earlier in the session.

Brent crude climbed 50 cents to $114.86. The United States and Poland signed a deal on Wednesday to station parts of a US missile defence shield on Polish soil, drawing a sharp response from Russia, the world's second-largest oil exporter.

The pact comes as relations between Russia and the West have been strained by Moscow's military intervention in Georgia.

The conflict there has disrupted the transit of Azeri oil through Georgia. International tension outweighed a US government report that on Wednesday showed crude inventories rose by 9.4 million barrels, the largest weekly increase since March 2001.