Brent tops $120 on Iran, North Sea, Greece

Brent crude rose on Thursday for a fourth day in a row, topping $120 a barrel at settlement -- an eight-month high -- on worries about supply from Iran and from the North Sea, where output was expected to dip next month.

The euro's rebound against the dollar also boosted crude oil on both sides of the Atlantic.

The euro surged, reversing an early decline after reports that euro zone central banks had agreed to exchange Greek bonds they hold for new bonds as part of a deal to help the debt-strapped country. This raised hopes that Greece's long-sought debt bailout would be agreed by next week.

U.S. crude erased an early $1 decline and rose to a six-week high as upbeat data on jobless claims and housing brightened the outlook for domestic energy demand. The U.S. data also helped lift Brent.

In London, ICE Brent April crude settled at $120.11 a barrel, gaining $1.18, or 0.99 percent, the highest settlement for front-month Brent since June 14, when prices ended at $120.16. The contract hit a session high of $120.38, the steepest since an intraday high of $120.40 on August 1.

In euro terms, Brent prices were the highest since 2008, according to Reuters data.

OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004
...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.

US Imports of Crude oil
(1)	(2)	(3)	(4)	(5)	(6)
Year	Quantity (thousands of barrels)	Value (thousands of US dollars)	Unit price (US dollars)	Average daily US$ per € exchange rate	Unit price (euros)
2001	3,471,066	74,292,894	21.40	0.8952	23.91
2002	3,418,021	77,283,329	22.61	0.9454	23.92
2003	3,673,596	99,094,675	26.97	1.1321	23.82

We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.

As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.

Let’s see...choices.

1. Prop the dollar higher to keep oil nearly imperceptibly lower, kill remaining exports and make the monstrous debt even harder to pay. That would bring our collapse sooner.

2. Or allow the dollar to equalize with our trading partners’ currencies to put off our default and western collapse processes a little longer.

Ugly choices.

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