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NEW YORK - OIL hit a record high near US$106 (S$147) on Thursday, fuelled by the weak dollar and Opec's decision to hold crude output steady.
United States oil settled up 95 cents at US$105.47 a barrel after hitting a record US$105.97 a barrel during the session. London Brent crude rose 97 cents to settle at US$102.61 a barrel, after hitting a record US$102.95.
The gains followed a US$5 jump on Wednesday, after declining US crude inventories and a decision by the Organisation of the Petroleum Exporting Countries to maintain production levels despite consumer-nation calls for more oil.
Speculative buying as investors seek a hedge against inflation and a tumbling dollar also drove oil prices higher.
'The dollar is going down again and hedgers are buying commodities and this is all adding fuel to the fire,' said Mr Mark Waggoner, president of Excel Futures.
The dollar extended losses against the euro and the yen on Thursday after US pending home sales were reported unchanged in January, doing little to allay investor worries over the deteriorating US economic outlook.
Wednesday's surge marked oil's single biggest price gain in absolute dollar terms, according to Reuters database EcoWin, although there have been larger daily percentage price gains.
'The crude squeeze continues. The sharp rise in crude was exacerbated by a weak US dollar, Opec's decision to stand still,' Citigroup said in a research note.
Speculators, Opec
Opec agreed to hold production at current levels on Wednesday, despite calls from the Untied States to increase output to help consumers already battered by the mortgage crisis and the credit crunch.
'We did try to encourage (an increase in Opec output). But if Opec has decided they are not going to increase output, there's not a lot that the president can do. We don't control their decisions,' White House spokesman Dana Perino said on Thursday.
Cartel members insist oil markets are well supplied and blame the surge in prices on speculators and 'mismanagement' of the US economy.
A US government report Wednesday showed crude stocks in the world's largest consumer fell by 3.1 million barrels last week, against analysts' forecasts for an increase.
Distillate inventories, including heating oil, fell 4.8 million barrels, dropping for the fourth consecutive week, as colder weather hit the US Northeast. Gasoline stocks rose for the 17th straight week.
Opec will next meet in September to assess production levels and evaluate the market, although ministers could confer informally at a conference between consumers and producers in Rome from April 20 to 22.
Tensions between Opec member Venezuela, a top oil exporter to the United States, and neighbour Colombia provided further support to the market.
Venezuela deployed forces towards the Colombian border on Wednesday, after a crisis erupted last weekend when Colombia launched a raid against rebels inside Opec member Ecuador. -- REUTERS
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