Crude oil prices touched $100 Tuesday as a weak dollar and bullish price forecasts from several investment banks spurred investment interest in commodities.
Light, sweet crude for July delivery gained $1.89, or 1.9%, to settle at $99.59 a barrel on the New York Mercantile Exchange. The benchmark contract had touched a high of $100.09 earlier in the day. Brent crude for July delivery on the ICE futures exchange was recently up $2.25, or 2%, at $112.35 a barrel.
The dollar slipped against the euro after upbeat data on German business confidence boosted the European currency. Crude oil futures recouped some of their recent losses as the dollar slumped. A weaker dollar raises the appeal of dollar-denominated commodities as they seem cheaper for holders of other currencies.
The ICE Dollar Index, which tracks the dollar against a basket of currencies, recently fell 0.4% to 75.871.
"As the day wore on we didn't see the dollar rally back up, it only weakened so it gave traders the confidence to come back and buy some of what they recently sold," said Peter Donovan, a Nymex floor trader with Vantage Trading.
Oil analysts at Goldman Sachs raised their price forecasts on Brent crude Tuesday, saying global economic growth will continue to pressure spare capacity among major oil producers.
The loss of production in Libya due to the civil war will "tighten the oil market to critically tight levels in early 2012," the analysts added. They raised their three-month forecast on Brent crude to $115 a barrel, their six-month forecast to $120 a barrel and their 12-month forecast to $130 a barrel.
"Although the growth environment is clearly slower than the one before the unrest began and downside risks remain in the near-term, we expect oil prices to move substantially higher over the next 18 months," the analysts wrote in a report to clients.
Forecasts from Goldman's analysts are closely watched in the oil world, and traders and hedgers often follow the bank's recommendations. The analysts said the recent pullback in prices offer a "good opportunity" for oil consumers to begin to hedge their forward exposure.
Morgan Stanley, another prominent voice, also raised its forecast on Brent crude late Monday. The bank lifted its 2011 Brent forecast to $120 a barrel from $110. It raised its 2012 forecast to $130 a barrel from $105.
"Oil fundamentals have improved markedly over the past year owing largely to an improvement in demand, and more recently on lost production," Morgan Stanley's oil analysts wrote.