Oil Hits New Record above $145, Then Drops

By Adam Schreck

AP Business Writer

July 3, 2008

CBNNews.com - NEW YORK -- Oil prices briefly soared to a new high near $146 a barrel Thursday, extending the previous day's record-shattering rally before easing as the dollar gained ground against the euro.

Americans hitting the road for the July Fourth holiday were confronted with an unwelcome record of their own: The average retail price for regular gasoline jumped to within two-tenths of a penny of $4.10 a gallon, according to AAA, the Oil Prices Information Service and Wright Express.

Light, sweet crude for August delivery added 6 cents to $143.63 on the New York Mercantile Exchange. Earlier in the session, it rose as high as $145.85 a barrel, topping a trading record set the previous day.

Oil prices settled at $143.57 Wednesday, up $2.60 above the previous high. They continued climbing overnight, propelled by a report of lower crude stockpiles in the United States, lingering concerns about conflict with Iran and comments by Saudi Arabia's oil minister suggesting his country would not boost production.

Prices backed off, however, after the European Central Bank did not signal more rate increases. That decision, which followed a widely expected quarter-point rate hike meant to stem inflation in the 15-nation euro zone, led the dollar higher against the euro.

A slumping dollar has been a key driver pushing oil prices up by half this year. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens, and a falling dollar makes oil less expensive to investors overseas. But when the dollar strengthens, traders have less incentive to buy commodities.

Speaking Thursday in Madrid, Saudi Arabia's oil minister said the world's biggest oil exporter had no immediate plans to boost crude output because there was no need to do so.

Ali Naimi said he was "concerned about the level" and suggested Saudi Arabia is ready to raise production if the kingdom determines supply-and-demand fundamentals have changed. But for now, the minister told reporters, "all our buyers are satisfied and happy."

Soaring fuel costs are squeezing cash-strapped drivers and driving up prices in the U.S., the world's leading oil consumer. The government issued more troubling economic news Thursday, reporting that U.S. employers cut payrolls by 62,000 in June, the sixth straight month of nationwide job losses.

But because the jobs report was largely in line with what analysts expected, it "had little-to-no impact" on oil prices, Tradition Energy analyst Addison Armstrong said.

In other Nymex trading, heating oil futures were largely flat at $4.0785 a gallon, while gasoline futures slipped about 0.3 cent to $3.5465 a gallon. Natural gas futures gained more than 6 cents to $13.451 per 1,000 cubic feet.

In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before retreating to $144.48, up 23 cents.

AP writer George Jahn in Madrid, Spain, contributed to this report.

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