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Published on March 18, 2008

World equity markets dived yesterday amid record highs in oil and gold prices, as investors dumped both stocks and the US dollar over fears that more US banks could be vulnerable to the credit crisis that sank Bear Stearns.

Oil futures for April delivery spiked to a record US$111.80 (Bt3,516) a barrel - up $1.59 from Friday's close - in Singapore yesterday, before slipping back to $111.61 a barrel.

The euro surged above $59 yesterday for the first time while the greenback dropped below 96 yen to a fresh 12-year low of 95.72 yen amid growing worries about the health of the US economy, dealers said. Gold was also trading at above $1,032 a fine ounce, as investors were rushing to what they saw as safe-haven investments in times of financial turmoil.

Investors fled the dollar after a surprise move by the US Federal Reserve on Sunday to provide cash to financially squeezed Wall Street investment houses.

"The Fed's move overall will help the liquidity of the US dollar, and that will really further soften the dollar," said Victor Shum, an energy analyst with Purvin and Gertz in Singapore.

"Meanwhile, investors seem to be just following the mantra of buying oil and commodities to hedge against the falling dollar and inflation."

In Thailand, gold prices skyrocketed to Bt15,550 per 15 grams (1 baht weight). The Thai baht also touched a new 12-year high at Bt31.33-35 against the greenback, before closing at Bt31.40-42 compared to Friday's closing of Bt31.39.

The Stock Exchange of Thailand also shed 1.38 per cent or 11.30 points to end at 806.74 points on thin turnover of Bt12.5 billion.

Retail oil prices also tended to rise further. PTT and Bangchak Petroleum today raised retail prices by 50 satang per litre to catch up with others at a time when refined diesel rose above $130 per barrel. However, Shell pushed its diesel price further by 50 satang today. After the increase, Shell's diesel is Bt31.44 per litre, while PTT's is Bt30.94. PTT witnessed a nearly-doubling in sales volume to 30 million litres per day when its price was 50 satang cheaper than other retailers.

As diesel hit new highs, provincial bus operators are reportedly seeking a fare hike of 9 satang per kilometre, while transportation companies also plan a fee increase.

At a seminar yesterday, Thammasat University lecturer Praiphol Khumsup suggested that the government let oil prices move freely and to concentrate on building infrastructure to reduce oil consumption in the long term.

Agencies, The Nation