AP
Oil Jumps to New Record on Dollar's Fall
Monday March 3, 3:57 pm ET
By John Wilen, AP Business Writer
Oil Jumps to a New Record Above $103 As the Dollar Declines to a New Low
Against the Euro

NEW YORK (AP) -- The surging price of oil reached another milestone
Monday, jumping to an inflation adjusted record high of $103.95.

The weaker dollar that has propelled oil and other commodities prices
higher sent light, sweet crude for April delivery past $103.76 a barrel
on the New York Mercantile Exchange. That's the level many analysts
consider to be the true record high for oil, after its $38 barrel price
from 1980 is translated into 2008 dollars.

Futures later retreated from that high to settle up 61 cents at $102.45
after Royal Dutch Shell PLC said it would resume oil shipments from
Nigeria that had been disrupted by rebel attacks.

Oil's most recent run into record territory has been driven by the
greenback's slump against other world currencies. Crude futures offer a
hedge against a falling dollar, and oil futures bought and sold in
dollars are more attractive to foreign investors when the dollar is falling.

Gold, copper and wheat are among the other commodities that have rallied
as the dollar has fallen.

"It's coming down to another commodity price rally," said Phil Flynn, an
analyst at Alaron Trading Corp., in Chicago.

The dollar has been weighed down by concerns about the U.S. economy and
the Federal Reserve's interest rate cutting campaign. Lower interest
rates tend to weaken the dollar, which fell Monday to a new low of
$1.5275 against the euro.

The struggling dollar has prompted a wave of speculative buying by oil
investors seeking a safe haven from the ongoing volatility of the stock
market. Such speculation can become self-perpetuating, driving prices
higher and attracting even more speculators.

Many analysts believe oil prices aren't justified by crude's underlying
supply and demand fundamentals, and are due to fall at some point. While
supply disruptions in Nigeria and the prospect of supply cutoffs from
Iraq and Venezuela helped boost oil prices last year, domestic oil
inventories are now rising even as a number of forecasters are cutting
their demand growth predictions due to the slowing economy.

Late in Monday's session Shell said it would resume oil shipments from
two of its Nigerian facilities that had been suspended under a
declaration of force majeure, in which a company says it can't meet
contractual delivery obligations due to events beyond its control, Dow
Jones Newswires reported. It was unclear how much oil the facilities
will pump. The news fed some of the late pullback in oil.

Investors are keeping an eye on OPEC, which meets Wednesday to consider
production levels. Most expect the Organization of Petroleum Exporting
Countries to hold output steady.

"Unless there's a surprise ... I think it's a non-factor at this time,"
said Linda Rafield, senior oil analyst at Platts, the energy research
arm of McGraw-Hill Cos., of OPEC's impact on trading Monday.

As for where oil goes from here, analyst estimates vary widely, with
some predicting an eventual decline to the $65 or $70 range as supplies
continue to grow and demand falls, and others seeing oil rising as high
as $120 as investment capital continues to flow into oil markets from
overseas.

For its part, the Energy Department's Energy Information
Administration's latest prediction is that oil will average $86 a barrel
in 2008, up 19 percent from 2007, when oil averaged $72 a barrel.

Surging oil prices are boosting prices at the pump. The average price of
a gallon of gas stood at $3.165 Monday, according to AAA and the Oil
Price Information Service. That's down 0.1 cent overnight, but up nearly
70 cents from a year ago. The Energy Department expects gas prices to
peak near $3.40 this spring, well above May's record of $3.227, but some
analysts predict prices could rise to nearly $4 a gallon.

Diesel prices, used to transport the vast majority of the nation's
goods, are also surging. Diesel prices hit another new record of $3.674
a gallon Monday.

In other Nymex trading, April heating oil futures rose 3.39 cents to
settle at $2.8408 a gallon, and April gasoline futures rose 0.21 cent to
settle at $2.672 a gallon. April natural gas futures fell 2 cents to
settle at $9.346 per 1,000 cubic feet.

In London, Brent crude futures rose 38 cents to settle at $100.48 a
barrel on the ICE Futures exchange.


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I wonder if anyone told Bush? Or will he find out at his next news
conference?