Oil roars to record over $108 on weak dollar

By Matthew Robinson

NEW YORK (Reuters) - Oil shot to a record over $108 a barrel on Monday, extending a rally led by investors seeking a hedge against the tumbling dollar and inflation.

U.S. crude settled up $2.75 at $107.90 a barrel, off a record $108.21 hit earlier in the session. London Brent crude jumped $1.78 to settle at $104.16 a barrel.

Fears of a U.S. recession following the biggest U.S. job losses in five years and strains in the credit market have sunk the dollar and raised expectations the Federal Reserve could cut interest rates again to prop up the economy.

Speculators have rushed into commodities to hedge against the weaker dollar as well as prospects that further Fed rate cuts could fuel inflation, helping to lift oil to average over $95 so far this year despite signs the faltering U.S. economy is crimping energy demand.

"It's the same thing that has been going on, it's a shark-like feeding frenzy on commodities. A lot of people feel the latest numbers on employment were bearish on the economy," said Peter Beutel, president of Cameron Hanover.

"The bottom line is people believe that as long as we see bearish numbers it will lead to another Fed cut."

The dollar tumbled against the yen on Monday as fears of a U.S. recession hit stock prices.

A fall in U.S. crude oil inventories reported in government data released last week and OPEC's decision on Wednesday to hold supplies steady have also boosted prices.