Oil rose above $142 a barrel in Asia on Monday, near a record high, as expectations of a weaker dollar spurred investors to seek refuge in dollar-denominated oil futures as a hedge against inflation.
"The main factors behind the rise today are the U.S. dollar remains fragile and geopolitical tensions, particularly surrounding Iran," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney. "That's unsettling for the oil market."
The European Cental Bank may raise interest rates at its next meeting on Thursday, a move that would help strengthen the euro against the dollar, Moore said.
Light, sweet crude for August delivery rose $2.26 to $142.44 a barrel in Asian electronic trading on the New York Mercantile Exchange, in afternoon trading in Singapore.
On Friday, crude futures spiked to a record $142.99 a barrel in New York before closing at $140.21.
Worries about tight oil supplies and growing global demand are also major factors in the doubling of oil prices since last year, Moore said.
Traders were digesting reported comments from the commander of Iran's Revolutionary Guards, who warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles. In a report published Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also move to control a key oil passageway in the Gulf.
Iran is the world's fourth-largest oil exporter and about 60 percent of the world's oil passes through the strategic Strait of Hormuz.
The report comes after the disclosure of a recent Israeli military exercise over the Mediterranean Sea that was seen as sending a message to Iran to curb its nuclear ambitions.
The dollar has weakened on expectations the Federal Reserve Board won't soon raise interest rates as the U.S. economy struggles with low growth. The Fed left its benchmark rate unchanged last week.
The dollar dipped to 105.20 yen in Asian trading Monday from 106.12 late Friday, while the euro was little changed at US$1.5806.
A falling U.S. stock market has also led investors to seek higher-yielding investments such as oil and other commodities. The Dow Jones industrial average has fallen to its lowest level in nearly two years _ and is down nearly 20 percent since its peak in October.
In other Nymex trading, heating oil futures rose 5.34 cents to US$3.9600 a gallon (3.8 liters) while gasoline prices rose 3.73 cents to US$3.5385 a gallon. Natural gas futures increased 14.2 cents to US$13.34 per 1,000 cubic feet.
Brent crude futures rose $2.36 to $142.67 a barrel on the ICE Futures exchange in London.
