Oil prices spiked this evening to new one-year highs above $81 as investors reacted to plunging US petrol reserves and a tumbling dollar, traders said.
New York's main contract, light sweet crude for December delivery, soared as high as $81.73 a barrel, a level last seen in October 2008. Brent North Sea crude for December delivery also rallied to a one-year high at $79.98.
The US government's Department of Energy said today that petrol reserves sank 2.3 million barrels in the week to October 16. That was far more than expectations of an 800,000-barrel drop.
The Department of Energy's weekly report is a key focus for the market because the US is the world's biggest energy consuming nation, followed by number two China.
The latest price peaks also came after the euro breached the key $1.50 level to hit new 14-month highs as many investors deserted the US unit in favour of higher yielding assets.
The falling greenback makes dollar-priced oil cheaper for buyers holding stronger currencies and therefore tends to stimulate crude demand and prices.
In earlier trading today, oil prices had fallen as investors took profits from a rally the previous day which saw New York crude breach $80 a barrel for the first time in one year.
A weak dollar and an upbeat mood about the global economic recovery are driving the recent gains in prices, according to oil industry watchers.
Despite topping $80, oil prices finished yesterday in negative territory after downbeat data from the ailing US property sector.
Meanwhile, OPEC is ready to invest funds to aid the production of oil amid a recovery in demand and rising prices for crude, the cartel's chief Abdalla Salem El-Badri said.
El-Badri, speaking at a London energy conference, also argued that $60-70 dollar oil would not be enough to allow adequate investment levels by OPEC, which pumps 40% of the world's oil.
