Oil sniffs at $100-mark on weak dollar

Crude oil prices are just 71 cents shy of the psychologically important $100 per barrel as a continuously weakening dollar has led to increased buying of the greenback-denominated commodity.

The buying frenzy has led to increased demand, which has fuelled crude oil price rally to $99.29 per barrel on Wednesday from below $50 in February this year.

"The sharp rise in crude oil prices is from the demand side unlike the supply side spike in April 1980, when supply side constraints existed in West Asia," said a Mumbai-based analyst.

After touching the record $99.29 per barrel on Wednesday, the price of US light crude oil fell to $97.78. "It's almost like its own momentum will take the prices to $100 per barrel and only then will prices cool," said another Delhi-based analyst.

In line with global crude oil prices, the Indian crude oil basket also rose to $89.89 per barrel on Tuesday, the latest day for which data is available. It is, however, still lower than the all-time high of $91.12 per barrel it hit on November 7 this year.

The soaring prices of the Indian crude oil basket, which comprises Oman-Dubai sour (high sulphur) grade crude oil and Brent dated sweet (low sulphur) crude oil in 59.8:40.2 ratio, has forced Prime Minister Manmohan Singh to constitute a group of ministers (GoM) to look into the issue of prices of automobile fuels.

The GoM, which has not yet been constituted, will report to the Union Cabinet with its recommendations soon.