Oil Rises to Record on Weakening Dollar

Crude oil rose more than $10 to a record as the dollar weakened after the U.S. unemployment rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month.

Crude oil for July delivery rose $10.75, or 8.4 percent, to settle at $138.54 a barrel at 2:48 p.m. on the New York Mercantile Exchange after touching a record $139.12. Today's gain was bigger than the entire price of oil on Dec. 10, 1998, when crude traded at $10.72 a barrel. Oil has more than doubled in the past year.

Gasoline for July delivery rose 21.35 cents, or 6.4 percent, to $3.548 a gallon in New York after reaching a record $3.565. Regular gasoline at the pump fell 0.3 cent to an average $3.986 a gallon after touching a record yesterday, AAA, the biggest U.S. motoring organization, said today on its Web site.

Shaul Mofaz, Israel's transportation minister and a contender for the post of prime minister, told the Yediot Ahronot daily newspaper that Israel will have to attack Iran if it doesn't abandon its nuclear-development program.

Brent crude oil for July settlement rose $10.42, or 8.2 percent, to $137.96 a barrel on London's ICE Futures Europe exchange after reaching a record $138.12.

A decline in oil prices earlier in the week came after Congress held hearings on possible energy price manipulation, and billionaire investor George Soros said an oil price ``bubble'' is working with fundamentals in the market that may lead to a recession.

Prices rose yesterday after European Central Bank President Jean-Claude Trichet's comment that the bank may raise interest rates next month caused the dollar to fall against the euro.

Oil has surged to records this year partly because investors have turned to commodities as a hedge against the falling dollar.

The dollar weakened further today after the Labor Department said the U.S. jobless rate increased by half a point to 5.5 percent, the biggest increase since 1986 and higher than every forecast in a Bloomberg News survey.

TradingEconomics.com, Bloomberg
6/6/2008 1:31:09 PM