Oil rallies to record $110 as dollar plumbs new low
NEW YORK (Reuters) - Oil pierced $110 a barrel on Wednesday, marking the sixth straight day of record highs, as the dollar sank to new lows and outweighed large increases in U.S. crude inventories.
Investors have raced into commodities over the past month to hedge against inflation and the slumping dollar, sending oil to fresh peaks despite concerns about the economic health of top oil consumer the United States and rising fuel stocks.
U.S. crude settled up $1.17 at $109.92 after racing to an all-time high of $110.20 earlier. London Brent gained $1.02 to settle at $106.27 a barrel, off a record $106.41 hit earlier in the day.
"There has been a huge detachment between price and fundamentals in the energy markets," said Rob Kurzatkowski, futures analyst at optionsXpress. "It has been more of a dollar play of late."
Oil fell earlier on Wednesday after U.S. government inventory data showed a sharp 6.2 million-barrel build in crude stocks last week and another gain in gasoline levels, now at 15 year highs. <EIA/S>
Analysts said crude's rise despite swelling inventories highlights the disconnect between supply and demand fundamentals and the current, speculator-driven price.
"It is a ridiculously bearish report," said Stephen Schork, editor of The Schork Report.
"We have major concerns regarding the economy in the United States, rising supply, falling demand. Why is crude oil trading at over $100 per barrel? It makes no fundamental sense."
U.S. consumers already face record gasoline prices at the pump due to soaring crude costs for refiners, prompting forecasts for gasoline above $4 a gallon in some regions as the summer driving season approaches.
The dollar tumbled to a record low against the euro as doubts grew about the long-term impact of recent Federal Reserve efforts to pump money into credit markets.
A day earlier, the greenback rallied after the Fed said it would lend primary dealers $200 billion in Treasury securities and accept a wider array of mortgage debt as collateral to ease tight credit conditions.
(Additional reporting by Alex Lawler in London; Chua Baizhen in Singapore, editing by Matthew Lewis)
