Oil hits $100 US, gold also sets record

Oil hit $100 US a barrel for the first time and gold prices broke a 28-year-old record on Wednesday as the bull run in commodities got new wind.

Data from the New York Mercantile Exchange indicated the price of the February contract for light, sweet crude oilhit$100 US shortly after noon ET.The price slipped to $99.62 US by the close of trading, up $3.64 US.

That broke the previous record of $99.29 US a barrel that wasset last November.

Oil prices jumped afterOPEC warned it might not be able to meet its share of global oil demand as early as 2024.

Fresh violence in Nigeria a major global oil producer was also seen as a factor in driving up prices.

On Tuesday, armed militants attacked two police stations and a hotel in the main oil industry centre of Port Harcourt. Thirteen people, including four police officers and six attackers, were reported killed in the raids.

Attacks by the militants have reduced Nigeria's oil exports by about 20 per cent over the past two years, putting upward pressure on global prices.

On Thursday, the U.S. government releases its weekly report onoil supply data.Analysts are looking for supplies to show a seventh consecutive weekly decline.

In Washington, the White Housesaid it would not release oil from
the U.S. government's 694-million barrelstrategic reserves to move prices lower.

"This president would not use the [Strategic Petroleum Reserve]
to manipulate [prices] unless there was a true emergency," said
White House press secretary Dana Perino.

Oil prices rose almost 60 per cent in 2007 as inventories shrank amid continuing strong demand. The big rise in oil is often cited as one of themain reasons for the rise in the Canadian dollar.The loonie which gained almost 20 per cent against the U.S. dollar last year actually lost ground Wednesday, closing down 0.15 cents at $1.0073 US.

Gasoline prices not at record

Despite record oil prices, gasoline prices are nowhere near record levels. The most recent pump price survey by MJ Ervin & Associates showed the average litre of regular gas cost $1.07 in Canada. That's well shy of the record $1.26 a litre average set in the wake of Hurricane Katrina in September 2005.

"It's because people aren't driving a lot right now so demand for gasoline is moderate," Calgary economist Frank Atkins told CBC News. "If we keep oil in the $90 to $100 range through the spring and especially into the summer, you're going to see the demand for gasoline go up."

However, Atkins said he sees oil prices coming down in 2008, saying it's "overvalued" at current levels.

The futures contract price for gold for February delivery went as high as$864.90 US per ounce intrading on the New York Mercantile Exchange. It ended the trading day up $22 US at$860 US an ounce a recordsettlement price for the precious metal.

Spot gold was quoted as high as $861.80 US in Wednesday trading.That tops the previousrecord high of $850 US an ounce set on Jan. 21, 1980.

Once inflation is taken into account,gold is nowhere near record levels. For gold prices to hit an inflation-adjusted record high, bullionwould need to be worth about $2,200 US an ounce today, depending on which inflation measure is used.

Stronger oil prices, a weak U.S. dollar and global political tensions were all cited by analysts as reasons behind gold's latest rise.

"There's a very strong correlation between gold and the U.S. dollar," said Patricia Croft, chief economist at Phillips, Hager& North. "But add to that the kicker of inflation fears, and it certainly does suggest that gold could see further upward momentum in 2008."

Gold stocks soar

The prospect of further increases in gold prices prompted a 7.5 per cent surge in the TSX gold sub-index, as gold company stocks soared.Barrick Gold jumped $3.87 to $45.65 a record high for the stock. Kinross Gold soared $1.70 to $20 and Goldcorp climbed $2.53 to a 20-month high of $36.53.

Gold prices rose 30 per cent in 2007 and are up more than 50 per cent in the last two years.

Platinum also hit an all-time high on Wednesday.