(Adds analyst comment, updates prices)
By Jane Merriman
LONDON, March 4 (Reuters) - Oil was steady on Tuesday after
it reached a record of almost $104 a barrel in the previous
session, buoyed by investor demand for commodities as well as
expectations OPEC will not increase supply despite high prices.
U.S. light crude for April delivery <CLc1> was up 50 cents
at $102.95 a barrel by 1230 GMT, after touching a record high of
$103.95 on Monday.
Prices retreated from the peak later on Monday to settle 61
cents higher at $102.45.
London Brent crude <LCOc1> was up 60 cents at $101.08.
"Large financial flows are heading to commodities because of
the falling dollar and falling stocks markets, even if
fundamentally, there is no reason for prices to rise further,"
said Marc Lansonneur, Societe Generale's head of commodities
derivatives in Asia.
The dollar recovered slightly from a run of record lows
against the euro and a basket of currencies on Tuesday after
European officials said they were concerned about excessive
exchange rate moves. []
REAL ASSETS
The risk that inflation could be on the rise has also
increased the attractions of "real assets" such as gold, other
metals and oil.
Gold <XAU=> hit a record just short of $990 an ounce on
Monday. Platinum has hit a record for the second day in a row
[] and copper has risen 26 percent since the start of
this year. []
"Money managers are taking one look at the sorry state of
investment alternatives out there and deciding that they will
put their money into commodities," said Edward Meir, analyst
with broker MF Global.
But there are also views that the impact of investor flows
on the oil price has been exaggerated.
Analysts at Goldman Sachs say increased fund activity has
only played a modest part in oil's rise.
"We maintain that the recent oil price rally has been
largely fundamentally driven and that the fund buying is more
likely the result of rising prices rather than the primary
cause," they said in a research note.
Comments from oil ministers gathering for a meeting of the
Organization of the Petroleum Exporting Countries in Vienna on
Wednesday suggest the oil producer group will not raise output.
"I don't think OPEC would consider increasing production
because then we would be increasing to meet demand that doesn't
exist," OPEC President Chakib Khelil said. []
A Reuters survey found OPEC output fell slightly in
February, its first decline in six months, reflecting the view
by some analysts that OPEC members are trimming production to
prepare for seasonally lower demand in spring. []
Latest U.S. government data on domestic fuel stocks look set
to support OPEC's assertion that supplies are plentiful.
U.S. crude oil inventories are forecast to have risen last
week for the eighth week in a row, according to Reuters'
preliminary poll. Analysts predict a 2.5 million-barrel increase
in crude stocks, a drop of 1.8 million barrels in distillates
and a 300,000-barrel build in gasoline stocks, already at a
14-year high. []. The data is due on Wednesday.
(Additional reporting by Maryelle Demongeot in Singapore;
editing by James Jukwey)
