Oil prices climb to record above $142 a barrel - KFDA - NewsChannel 10 / Amarillo News, Weather, Sports

Oil prices climb to record above $142 a barrel

NEW YORK (AP)  - Oil futures climbed to a new record near $143 a barrel today 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.

Light, sweet crude for August delivery rose as high as $142.93 a barrel on the New York Mercantile Exchange before pulling back slightly to trade up $2.80 at $142.44. 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.

"Oil's back in favor, especially with people bailing out of the stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

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, and in early afternoon trading today was down nearly 136 points.

"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.

Today, the dollar weakened against the euro, with a euro buying $1.5776.

At the pump, meanwhile, gas prices slipped 0.1 cent overnight to a national average of $4.066 a gallon, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen slightly from their June 16 record of $4.08 a gallon, but will likely resume their record breaking rise if oil futures keep trending higher.

That seems likely. Oil has more than doubled in the past year due to the dollar's decline, but also because of rising global demand, particularly in fast-growing economies such as China and India. Supply outages in the Middle East and Nigeria have also contributed, as has falling production in Mexico.

The sharp increase in oil prices has driven a similar rise in fuel prices. Gas prices are $1.09 higher than a year ago, and diesel prices were up $1.85 over the past year at a national average of $4.763 a gallon today. Diesel is used to fuel most industrial vehicles, trucks, trains and ships, and its increase is a large part of the reason food and consumer goods prices are rising, putting additional pressure on consumers already paying $4 and more for gas. Diesel prices peaked at $4.797, also on June 16, but are likely to push past that record if oil futures keep rising.

In other Nymex trading today, July gasoline futures rose 7.12 cent to $3.5825 a gallon, and July heating oil futures rose 7.91 cents to $3.9625 a gallon. August natural gas futures rose 11.1 cents to $13.359 per 1,000 cubic feet.

In London, Brent crude futures rose $2.52 to $142.35 a barrel on the ICE Futures exchange.

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