Oil climbs above $126 to record as dollar weakens against euro

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Oil falls below USD 52 per barrelOil falls towards USD 53 per barrelOil falls towards USD 53 per barrelOil rises to above USD 51 per barrel

May 11 : Crude oil rose above $126 a barrel in New York to a record, as the dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency’s decline.

For a fifth day oil climbed to all-time highs as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation. Nigerian output fell to the lowest this decade in April because of a strike and attacks on oil installations.

“Oil is a safe haven because of the weak dollar and how badly the financial sector has been doing,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There are also geopolitical concerns about places like Nigeria and Venezuela that are propping prices up.”

Crude oil for June delivery rose $2.27, or 1.8%, to a record closing price of $125.96 a barrel at 2:55 pm on the New York Mercantile Exchange. The contract surged to $126.27 on Friday, the highest since futures began trading in 1983. Prices are up 8.3% this week, the biggest weekly gain in more than a year. Futures have more than doubled in the past year.

Brent crude oil for June settlement climbed $2.56, or 2.1%, to close at a record $125.40 a barrel on London’s ICE Futures Europe exchange. The contract touched $125.90 on Friday, the highest since trading began in 1988. Oil at $200 is “possible if we have a continuing devaluation of the dollar with respect to other currencies,” Opec president Chakib Khelil said on Thursday

The dollar fell 9.6% since September 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The US central bank cut rates seven times while the ECB has left rates unchanged. The dollar fell 0.6% to $1.5483 per euro at 3:27 pm in New York.

“Fed policy is accommodating the rise in energy prices,” said Bill O’Grady, director of fundamental futures research at Wachovia Securities in St Louis. “The Fed and federal government are putting more liquidity in people’s pockets, which is being spent on expensive oil.” The US government started sending $117 billion in tax rebate checks last week as part of its fiscal stimulus plan.