Oil surges to highest mark ever

Oil surges to highest mark ever


SINGAPORE (AP) -- Oil prices rose to a new intraday high near $102 a barrel Wednesday as a slide in the U.S. dollar prompted investors to pump more money into energy futures as a hedge against inflation.

The dollar sank to a record low against the euro after the release of three disheartening U.S. economic reports Tuesday that show that the economy is slowing even as prices are rising. The dollar's decline prompted investors to seek a safe haven from turmoil in the financial markets and the threat of inflation.

"Crude has cracked through the $100-level again and that's driven by financial investors moving money into commodities markets," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"The U.S. dollar weakened against the euro and the economic data also indicated that inflation in the U.S. rose in January, and commodities are generally considered a hedge against inflation," Shum said. "We are therefore seeing these strong prices that have really little to do with oil market fundamentals."

Light, sweet crude for April delivery spiked as high as $101.70 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore, before slipping back slightly to $101.55, up 67 cents.

The contract on Tuesday jumped $1.65 to settle at $100.88 a barrel, a record close.

In London, Brent crude added 65 cents to $100.12 a barrel on the ICE Futures exchange, below the intraday record of $100.30 a barrel set earlier in the session.

The U.S. Labor Department said wholesale inflation rose by 1% in January on soaring oil and food costs. And Standard & Poor's also reported that U.S. home prices fell 8.9% in the last three months of 2007 from a year earlier. It is the sharpest drop in the S&P/Case-Shiller quarterly index's history.

A report by the Conference Board, a business-backed research group, that its Consumer Confidence Index fell to the lowest since February 2003, far below what analysts had been expecting, indicated that consumers might continue to curb their spending in the coming months.

But traders in both the energy market and the U.S. stock market, which also advanced sharply, seemed largely unfazed. Oil has risen in recent days amid an increase in speculative buying, with some traders believing that global demand will be high enough to support higher crude prices even if the American economy is slowing.

In currency trading, the euro rose above $1.50 for the first time, reaching $1.5057 before falling back slightly to $1.5048.

Analysts expect the U.S. Energy Department's Energy Information Administration to report later Wednesday that the nation's crude oil stocks rose last week by 2.4 million barrels, which would be the seventh straight week of gains.

Gasoline inventories are expected to rise by 400,000 barrels while supplies of distillates, which include heating oil and diesel, fell by 1.8 million barrels last week, according to a Dow Jones Newswires poll of analysts.

Also supporting prices were concerns about supply disruptions from unrest in Iraq, a major oil exporter. Turkish ground forces pushed their offensive against Kurdish rebels deeper into the north of Iraq, seizing seven guerrilla camps, officials said Tuesday.

In other Nymex trading Wednesday, heating oil futures rose 0.65 cent to $2.8215 a gallon (3.8 liters) while gasoline prices added 0.2 cent to $2.5525 a gallon.

Natural gas futures lost 2.6 cents to $9.18 per 1,000 cubic feet

CNN