London - Oil prices hit fresh peaks on Wednesday, rising to their highest since August 2008 buoyed by unrest in the Middle East and North Africa and dollar weakness ahead of an expected European Central Bank (ECB) interest rate increase.
Brent crude rose $1 to break through $123 a barrel in late afternoon trade, its highest since August 2008, and US crude rose to its highest since September 2008 above $109.
The ECB is expected to raise interest rates by 0.25% on Thursday in the first hike since the 2008 financial crisis.
The expectations have propelled the euro to a 14-month high, while the dollar was down 0.38% late afternoon.
"Central bankers will always claim that they have no influence on oil prices but recent history has repetitively shown that in the new world, where commodities are a global asset, central bankers can have a greater influence on oil prices than Opec," said Olivier Jakob from Petromatrix.
Members of the Organisation of the Petroleum Exporting Countries said on Wednesday they could do little to control prices driven by speculators betting on "worst-case scenarios", and said the market had all the oil it needed.
The rally in the euro took place even though Moody's rating agency cut several Portuguese banks and the country paid higher costs at a T-bill auction.
Analysts said a return of risk appetite amid expectations of strong recovery in the United States had outweighed yet another increase in China's interest rates on Tuesday, the fourth since October, to tame inflation.
"China is supposed to be leading the commodity complex but an increase of Chinese rates is no longer a trading input for more than a few minutes," said Jakob.
A Reuters poll showed on Wednesday that China was expected to raise rates only once more this year as it is heading for a pause in its cycle of monetary tightening.
Singapore-based Serene Lim of ANZ said the impact from the hike would be mitigated by the turmoil in Libya.
"It is a stalemate in Libya and this will give support to oil prices, which are trading at a very tight range," she said.
In Libya, the head of the rebel army said Nato had been too slow to order air strikes to protect civilians.
In Bahrain, firms have fired hundreds of mostly Shi'ite Muslim workers who went on strike to support pro-democracy protesters, an opposition group said on Tuesday, in what appeared to be part of a government crackdown.
"It is hardly surprising that US oil is not able to keep up with the latest rally and is even tending a little softer," Commerzbank analysts said in a note.
"This is because the tensions in North Africa are largely behind the rise in prices, while the supply situation in the US essentially remains relaxed."
Technical analysis showed Brent could rise above $126, said Reuters analyst Wang Tao.
Brent's rally to above $120 a barrel could soon fizzle out, according to a majority of traders and analysts in a Reuters poll released on Wednesday.
But they expected Brent to roar back above $130 in the second half of this year.