$100 a barrel oil could lose its shock value

By Barbara Lewis and Pratima Desai - Analysis

LONDON (Reuters) - Oil at $100 a barrel could soon lose its shock value as weakness in other asset classes and fundamental strength lure investors and speculators.

U.S. crude on Wednesday hit another new high of $100.40 after on Tuesday closing for the first time above $100 a barrel at $100.01.

It previously touched $100 in intraday trade on January 2 and broke through the level to $100.09 on January 3.

Traders and analysts said there was no single reason for the latest rally, in tandem with strong moves on other commodities. Aluminum on Wednesday touched a nine-month high and copper hit a four-month high on Tuesday.

But they said the price rise, spurred as the market climbed through technical levels, was built on an underlying trend. It marked the end of selling oil short on the basis that a U.S. economic slowdown could impact demand for oil and other commodities.

"Shorting oil because the U.S. economy is going to be weak has always been dangerous. It began unraveling last week and that accelerated," said Paul Horsnell of Barclays Capital.

"A period bouncing either side of $100 would seem to be a reasonable base case," Horsnell said, adding continued strong demand from the Middle East and Asia would offset the impact of any downturn in the U.S. economy.

Equities markets have been hit sharply by concerns about U.S. economic weakness and for a period this year, oil and other commodities were closely correlated with volatility on stock markets.