Crude edges over US$142 a barrel

By Mark Shenk  |   2008-6-30  |     NEWSPAPER EDITION

CRUDE oil rose above US$142 a barrel for the first time as falling stock markets spurred investment in commodities.

Oil has climbed 46 percent this year as the US dollar declined against the euro and the MSCI World Index of global equity markets dropped 12 percent. Oil may extend gains if the European Central Bank boosts rates on July 3, further weakening the US currency.

"The trend to hard assets, and energy in particular, is unabated," said John Kilduff, vice president of risk management at MF Global Ltd in New York. "There's a lack of confidence in stocks and other markets right now, which has investors looking for safe havens."

Crude oil for August delivery rose 57 cents, or 0.4 percent, to settle at US$140.21 a barrel on Friday on the New York Mercantile Exchange, a record close. The August contract rose US$4.85, or 3.6 percent, last week.

Prices, which are up 38 percent this quarter, are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between US$11 and US$17.

"This market is very volatile," said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc in Englewood, New Jersey. "Prices fell from almost US$143 to US$140 between 2pm and 2:30pm. There's very little volume, which makes it a lot easier to move the market."

Futures advanced to US$142.99 at 1:58pm on Friday, the highest since trading began in 1983.

On Thursday, the contract jumped US$5.09, or 3.8 percent, to US$139.64 a barrel as Libya threatened to cut output.

"I don't know when this rally will end because there are too many folks in the finance community betting on prices to rise," said Rick Mueller, director of oil practice at Energy Security Analysis Inc in Wakefield, Massachusetts. "Gains have nothing to do with the physical market." The Standard & Poor's 500 Index declined 13 percent so far this year to 1,280.13. The Dow Jones Industrial Average dropped 14 percent to 11,366.22 during the same period.

Brent crude oil for August settlement rose 48 cents, or 0.3 percent, to settle at a record US$140.31 a barrel on London's ICE Futures Europe exchange. Futures earlier climbed to US$142.97, the highest intraday price since trading began in 1988.

BP Plc shut a crude-oil unit for repairs at its Dutch refinery, Europe's second-largest, cutting fuel production, industry sources said.

Repairs to one of the two crude distillation units at the 400,000 barrel-a-day plant in Rotterdam were scheduled to begin at the weekend and last until about July 19, the sources said. BP spokesman Robert Wine in London couldn't immediately comment.

The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, rose as much as 1.1 percent to a record 1,683.928 on Friday.