Tuesday, April 22, 2008

Crude Oil Rises to All-Time High Above $119 on Record Euro

By Mark Shenk

April 22 (Bloomberg) -- Crude oil rose to a record $119.90 a barrel in New York as the dollar dropped to an all-time low against the euro, prompting investors to purchase commodities as an inflation hedge.

Oil gained as the dollar touched $1.60 per euro for the first time after European Central Bank policy makers signaled they may raise interest rates because of inflation. Crude's 24 percent surge this year pulled gasoline and diesel to records, weighing on an economy already reeling from a credit crisis.

``This market defies gravity,'' said Tom Bentz, a broker at BNP Paribas in New York. The falling dollar ``provided us with the push we needed to make a new record,'' he said.

Crude oil for May delivery advanced $1.89, or 1.6 percent, to settle at $119.37 a barrel at 2:43 p.m. on the New York Mercantile Exchange, a record close. Futures reached $119.90 today, the highest intraday price since trading began in 1983. Prices are up 88 percent from a year ago.

The May contract expired today. The more-active June futures rose $1.12, or 1 percent, to settle at $118.07 a barrel.

Brent crude for June settlement gained $1.52, or 1.3 percent, to close at a record $115.95 a barrel on London's ICE Futures Europe exchange. The contract touched $116.75 today, an all-time intraday high.

Regular gasoline, averaged nationwide, gained 0.8 cent to a record $3.511 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Diesel advanced to $4.204 a gallon.

``We are starting to see a lot of economic pain as a result of these prices,'' said Antoine Halff, head of energy research at New York-based Newedge USA LLC. ``This is going to have an impact on demand.''

Record Gasoline Futures

Gasoline futures for May delivery jumped 3.73 cents, or 1.3 percent, to close at a record $3.0164 a gallon in New York after reaching an intraday record of $3.025 a barrel.

Heating oil for May delivery rose 0.55 cent to a record settlement price of $3.3169 a gallon. The contract reached $3.35, the highest since trading began in 1978. Some traders use heating-oil futures to hedge their diesel and jet-fuel purchases. All three are classed as distillate fuels.

The falling dollar and higher global demand for raw materials have led to records this year for commodities including gold, corn, soybeans and rice. The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, gained 1.2 percent to 1521.008 today, up 37 percent from a year ago.

Euro Gains

The euro rose to $1.5998 at 3:10 p.m. in New York, up from $1.5912 yesterday, and touched $1.6019, the highest since the European single currency was introduced in 1999.

Crossing $1.60 per euro means ``there will be a lot of commodity buying, especially oil,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut.

The dollar extended its drop against the euro after a U.S. industry report showed sales of previously owned homes fell in March. Falling house prices and rising mortgage delinquencies have slowed U.S. economic growth.

Oil also gained on a Nigerian supply disruption and a U.K. refinery strike threat.

Royal Dutch Shell Plc said yesterday it would declare a force majeure on oil exports after 169,000 barrels of daily output in Nigeria was suspended because of rebel attacks. Force majeure is a clause that allows companies to miss deliveries because of circumstances beyond their control.

Nigerian Disruptions

``It will be very bullish if the rebels expand their campaign and succeed in disrupting more production,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``This is very sweet crude that refiners are going to need as the summer approaches.''

Crude from Nigeria, Africa's biggest producer, is low in sulfur, or sweet, and is prized by U.S. refiners because of the proportion of high-value gasoline it yields.

Ineos Group Holdings Plc and union negotiators failed to resolve a labor dispute that may cause a two-day strike at the 200,000 barrel-a-day Grangemouth refinery in Scotland. Talks will resume tomorrow.

The plant takes crude from BP Plc's Forties Pipeline System, which transfers oil from more than 50 North Sea fields.

ConocoPhillips's Humber plant in northern England is partially shut for maintenance, two people with knowledge of the project said. That may further reduce U.K. fuel supplies.

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