Oil futures climbed briefly to a new record above $142 a barrel Friday on expectations that the weakening dollar, a major factor in crude's stratospheric rise, will extend its decline and add to oil's appeal.
Retail gas prices inched lower overnight, but are likely to resume their own trek into record territory now that oil futures have broken out of the trading range where they had been for nearly 3 weeks.
In London, Brent crude futures rose $1.35 to $141.18 a barrel on the ICE Futures exchange.
Light, sweet crude for August delivery rose as high as $142.26 a barrel in premarket electronic trading on the New York Mercantile Exchange before pulling back to trade up $1.50 at $141.14. On Thursday, the contract shot past $140 and rose more than $5 to a new settlement record.
Oil rose Thursday in part on comments by OPEC officials; the organization's president predicted prices will rise further, and a top Libyan oil official suggested his nation may cut production.
Meanwhile, traders were coming around to the belief that the dollar, whose long decline has contributed greatly to oil's dramatic advance this year, will continue to weaken. The market now expects that the Federal Reserve will be unlikely to raise interest rates until much later than many analysts have forecast; since higher rates tend to strengthen the dollar, traders are anticipating that it will continue to fall and, consequently, that investors will turn to commodities including oil as a hedge against inflation.
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 to its lowest level since September 2006 on a combination of worries about oil prices and the financial, automotive and technology sectors.
"The renewed attraction of commodities as an investment vehicle is contrasting with the unattractiveness of the stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois, in a research note.
"When money has nowhere to go, it is parked in commodities as it is one of the few investment instruments that actually rises the more money you pour into it," said Oliver Jakob, an analyst at Petromatrix Gmbh, in Switzerland in a note.
On Friday, the dollar was essentially unchanged against the euro, with a euro buying $1.5749.
In other Nymex trading Friday, July gasoline futures rose 3.72 cent to $3.5485 a gallon (3.79 liter), and July heating oil futures rose 5.89 cents to $3.9423 a gallon ($14.92 liter). August natural gas futures rose 9.6 cents to $13.344 per 1,000 cubic feet (28.32 cubic meters).
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Associated Press Writer David McHugh in London contributed to this report.
