Oil leaps over $134 on weak dollar

LONDON - Oil soared by more than $6 a barrel to over $134 on Friday, bringing gains in the last two days to $12 as the dollar weakened further on a jump in the jobless rate in the United States.



By (Reuters)

Published: Fri 6 Jun 2008, 10:13 PM

Last updated: Sun 5 Apr 2015, 1:07 PM

Remarks by Israel's transport minister that an attack on Iranian nuclear sites looked 'unavoidable' and a Morgan Stanley report predicting oil could reach a record high of $150 by July 4, also sent crude prices roaring upwards.

'We are calling for a short-term spike in oil prices,' the bank said.

'Middle East oil exports are stable but Asia is taking an unprecedented share.'

U.S. light crude for July delivery was up $6.19 at $133.98 a barrel by 1501 GMT, just over a dollar away from a record high of $135 hit last month.

Oil had surged $6 in after-hours trading on Thursday in the U.S., erasing two days of sharp losses triggered by worries that high oil prices were starting to dent demand.

London Brent crude rose $5.72 to $133.26.

The dollar fell further after figures showing the U.S. economy lost jobs for the a fifth straight month and the unemployment rate shot up to its highest in more than three years.

The dollar has fallen by more than one percent since European Central Bank President Jean-Claude Trichet said on Thursday a number of policymakers wanted higher interest rates and a hike was possible as soon as next month.

Investors have used oil and other commodities as a hedge against the weaker dollar and inflation as the housing crisis and high fuel prices batter the U.S. economy.

Comments from Israel's transport minister that an attack on Iranian nuclear sites looked 'unavoidable' given the apparent failure of sanctions to deny Tehran technology with bomb-making potential also helped drive prices higher.

This was the most explicit threat yet against Iran from Prime Minister Ehud Olmert's government.The remarks from the Israeli government gave added momentum to the rally, said Olivier Jakob of analysts Petromatrix.

'Financial money is flowing back into oil and commodities,' said Jakob. 'When the market is in such a strong rally, there is a tendency to read the bullish headlines rather than the bearish ones.'

Demand

The fall in the dollar put longer-term worries about weakening oil demand on the backburner, after they were rekindled earlier this week when India and Malaysia decided to raise domestic fuel prices to cope with bulging subsidy bills.

The International Energy Agency (IEA), an adviser to 27 industrialised countries, issues its latest forecasts next week and has said it may lower its 2008 demand growth projection further, after having already more than halved it to 1.03 million barrels per day (bpd).

But some analysts say subsidy cuts in Asia will not be enough to slow oil use.

'World oil demand growth is still accounted mostly by China, the Middle East and Latin America -- and through the summer, there is no reason to expect a material slowdown in demand growth in these areas,' said Harry Tchilinguirian, oil analyst at BNP Paribas in London.


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