Nymex Oil Ends at Record $145.29/Bbl, Aims Higher

OTTOWA, July 03, 2008 (Dow Jones Newswires)

Crude oil futures closed above $145 a barrel for the first time as market participants shrugged off a stronger dollar to test new highs ahead of the Independence Day weekend.

Light, sweet crude for August delivery settled up $1.72, or 1.2%, at $145.29 a barrel Thursday on the New York Mercantile Exchange, after hitting a new all-time high of $145.85 a barrel in overnight trading. Brent crude on the ICE futures exchange settled $1.82 higher at $146.08 a barrel, down from an intraday record of $146.69 a barrel.

"For the moment, the market is still preoccupied with the question: how high can it go?" said Tim Evans, an energy analyst at Citi Futures Perspective in New York.

"That's the focus in this market and it's not letting a stronger dollar get in the way."

Crude prices have shot up 50% in the year to date as the market eyes ferocious oil demand in Asia and the Middle East, despite weaker global economic conditions and a significant pullback in U.S. demand. But many participants have also pointed the finger at speculators, pouring funds into commodity markets as global economic conditions started to deteriorate last year.

Investors have sought oil as a safe haven against the weakening dollar and volatile equity markets, as well as a hedge against inflation. Participants pointed to Thursday's European Central Bank's interest rate hike and key U.S. jobs data - both of which came in at or near expectations - as leading the oil market.

U.S. non-farm payrolls shrank by 62,000 in June, the sixth straight loss, the Labor Department said, close to market expectations of a 55,000 loss. While the report gave the dollar a leg up, the ECB's quarter of a percentage point rate hike to 4.25% had a bigger impact.

The dollar jumped against the euro as ECB President Jean-Claude Trichet appeared to rule out further rate increases. Recovering U.S. stock markets boosted the greenback further, with both the Dow Jones Industrial Average and the Standard & Poor's 500 finishing higher on the day.

Oil prices flirted briefly with negative territory on the currency moves, but momentum remains firmly biased to the upside, with many traders seeing any dips as a buying opportunity. Evans noted that the dollar has been trading "sideways or higher" in the past three months, while oil prices have repeatedly smashed through records.

Reaction from Wednesday's U.S. government report showing yet another drop in U.S. oil stockpiles spilled over into Thursday. Sentiment also remained buoyant from the International Energy Agency's annual medium-term outlook released Tuesday, which indicated tightening global oil supplies through 2013 despite trimming demand growth forecasts.

Traders appeared to pay little attention to increased crude output from Saudi Arabia, the world's biggest oil producer. At Madrid's World Petroleum Congress, Saudi oil minister Ali Naimi confirmed that the kingdom's output would reach a 27-year high of 9.7 million barrels a day this month. He reiterated that speculation, not supply constraints, was driving the oil price, a stance the Organization of Petroleum Exporting Countries has studiously maintained during crude's dizzying rise.

Trading volumes were light Thursday as participants squared their positions ahead of the Independence Day weekend in the U.S.. Floor trading will be closed on the Nymex on Friday, and trading activity is expected to be minimal with many Americans on holiday.

But many expect crude oil to keep aiming higher next week.

"The trend is definitely still up," said Tom Bentz, an energy broker at BNP Paribas in New York. "We'd need to get back down to yesterday's low at $140 before people even start thinking of a turnaround."

Front-month August reformulated gasoline blendstock, or RBOB, settled up 2.16 cents, or 0.61%, at $3.5710 a gallon. August heating oil settled 3.45 cents, or 0.85%, higher at $4.1060 a gallon.

Copyright (c) 2008 Dow Jones & Company, Inc.