Soaring oil prices fuel economic fears (Lead)

May 9th, 2008 - 7:12 pm ICT by admin  

Frankfurt, May 9 (DPA) Oil prices are ending the week on a record high after surging towards $125 per barrel in trading Friday. A weak US dollar combined with American supply worries ahead of the summer holiday season along with strong demand from the world’s leading emerging economies have led to oil prices posting their biggest weekly gain in more than 12 months.

After hitting a record 124.70 dollars in Asian trading Friday, oil prices continued to edge forward in early European trading, after rising to $124.80 a barrel.

“The oil market is in a very euphoric mood and now has $125 in its sights,” said a trader in Singapore with energy prices having climbed by more than $8 since the start of the week.

Some analysts have warned that oil prices could soar to $150 or $200 a barrel in the next six months as the rapid economic change in nations such as China and India and the approach of the key US summer driving season help to push up demand.

Coinciding with rising food prices, soaring prices have fuelled fears about resurgent inflation and add to concerns about the economic growth outlook for the world economy.

Moreover, coming at a time of slowing global growth, the risk of renewed inflationary pressures is placing central banks in a dilemma.

Europe’s two leading central banks - the European Central Bank and the Bank of England - left key interest rates on hold as they size up the monetary policy fallout from the pickup in inflation and crimping international growth.

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