Oil prices set new record near US$143 a barrel

Source: Agencies  |   2008-6-28  |     ONLINE EDITION

OIL futures climbed to a new record near US$143 a barrel yesterday as the dollar weakened against the euro, confirming expectations that the falling greenback, a major factor in crude's stratospheric rise, will extend its decline and add to oil's appeal.

Light, sweet crude for August delivery rose as high as US$142.99 a barrel on the New York Mercantile Exchange before pulling back sharply in a spate of late-day profit-taking to settle up 57 US cents at a record US$140.21. On Thursday, the contract shot past US$140 and rose more than US$5 to a new settlement record.

In London, Brent crude futures rose 48 US cents to settle at US$140.31 a barrel on the ICE Futures exchange.

The latest record came as the dollar fell against the euro in afternoon trading, having traded roughly unchanged for much of the day.

"The dollar was slightly stronger, and when it gave up its gains, that gave oil the green light," said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.

The market now believes the Federal Reserve is unlikely to raise interest rates in the near future; since higher rates tend to strengthen the dollar, traders are anticipating that it will continue to fall and, consequently, that investors will keep turning to commodities including oil as a hedge against inflation.

"Oil's back in favor, especially with people bailing out of the stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.

The stock market's recent swoon is also sending investors in search of higher-yielding investments. On Thursday, the Dow Jones industrial average fell nearly 360 points, and in afternoon trading yesterday was down more than 100 points.