FACTBOX-Why oil prices are at a record high

LONDON (Reuters) - U.S. crude oil hit a new all-time high of $105.97 a barrel on March 6, boosted by a combination of a weak U.S. dollar, tight oil supplies and OPEC's decision not to boost supplies.

The Organization of Petroleum Exporting Countries (OPEC) on March 5 once again decided against changing its output policy, the third straight meeting when it has left supplies unchanged.

Robust demand for crude, real and threatened disruptions to supply and a weak U.S. dollar have fuelled the rally from a dip below $50 at the start of 2007.

FUNDS

Investment flows from pension and hedge funds into commodities including oil have boomed, as has speculative trading.

At the same time, a global credit crunch has brought some other markets, such as the U.S. asset-backed commercial paper market, to a virtual standstill.

Some of that money has found its way into energy and commodities, analysts say.

DOLLAR WEAKNESS

The fall in the value of the dollar against other major currencies has helped drive buying across commodities as investors view dollar assets as relatively cheap.

It has also reduced the purchasing power of OPEC's revenues and increased the purchasing power of some non-dollar consumers.

OPEC oil ministers have noted that although prices are rising to record nominal levels, inflation and the dollar have softened the impact.

Some analysts say investors have been using oil as a hedge against the weaker dollar.

DEMAND

While previous price spikes have been triggered by supply disruptions, demand is a main driver of the current rally.

Global demand growth has slowed after a surge in 2004 but is still rising, despite an economic slowdown in top consumer the United States. Higher prices have so far had a limited effect on economic growth.

Analysts say the world is coping with high nominal prices because, adjusted for exchange rates and inflation, they are lower than during previous price spikes and some economies have become less energy intensive.