Crude oil futures hit a record
close to $140 a barrel Monday as the dollar weakened against the euro.
Retail gas prices rose to a record $4.08 a gallon.
Light, sweet crude
for July delivery rose to $139.89 before retreating to trade up $3.62
at $138.48 a barrel on the New York Mercantile Exchange.
Many
investors buy commodities such as oil as a hedge against inflation when
the dollar falls. Also, a weaker dollar makes oil less expensive to
investors dealing in other currencies. Many analysts believe the
dollar's protracted decline is a major factor behind oil's doubling in
price over the past year.
The euro bought $1.5504, a sizable
increase from $1.5354 late Friday in New York. The British pound rose
to $1.9668 versus $1.9469 in New York.
Also supporting prices was
an overnight fire at a StatoilHydro ASA drilling rig in the North Sea,
which could affect as much as 150,000 barrels of daily oil production,
said Addison Armstrong, director of market research at Tradition Energy
in Stamford, Conn.
But prices of North Sea-produced Brent crude
oil, while higher, were lagging Nymex crude's advance, suggesting to
analysts that the dollar was the main driver of Monday's rally.
"We
have a weaker U.S. dollar, and the buyers are out in force right now,"
said James Cordier, president of Tampa, Fla.-based trading firms
Liberty Trading Group and OptionSellers.com.
Saudi Arabia, the
world's largest oil producer, told U.N. chief Ban Ki-moon over the
weekend that it would boost output by 200,000 barrels a day, or by 2
percent, from June to July. In May, the kingdom raised production by
300,000 barrels a day. That increase was largely ignored by traders
amid strong global demand and falling production elsewhere.
It appeared as if the same thing happened Monday.
"They
have to increase by north of 1 million barrels per day (in order to
have an impact on prices), and the market doesn't think they have it,"
Cordier said.
At the pump, meanwhile, the national average price
of a gallon of gas rose 0.3 cent overnight to its latest milestone,
according to AAA and the Oil Price Information Service. Gas prices are
following crude prices higher, and likely have several more cents to
rise before catching up with oil's latest advance. If oil prices pass
$140 and head even higher, the pain consumers are feeling at the pump
will intensify. (***)
Associated Press writers George Jahn in Vienna, Austria, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
