NEW YORK - Oil prices fluctuated Monday, surging past US$143 a barrel for the first time and then falling back as a rising dollar prompted some investors to sell. Meanwhile, the price of gas at the pump hit another record high.
Supply concerns, a weak dollar and a fragile global economy continue to drive the price of oil to new highs, as well as continued tensions in the Middle East. However, oil gave back its gains after the Chicago Purchasing Managers' index of Midwest manufacturing beat estimates and the dollar responded by rising against the euro.
Light, sweet crude for August delivery rose 10 cents to $140.31 a barrel on the New York Mercantile Exchange but was moving in and out of positive territory. In early electronic trading, the contract hit a record $143.67.
On Friday, crude futures spiked at a record $142.99 a barrel in New York before falling to $140.21.
"Oil is being used as a flight to quality and hedge against the dollar and geopolitical risk,'' said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "It pulled back some when PMI came in better than expected and the dollar is hanging in there right now.''
The Chicago Purchasing Managers' index for June rose to 49.6 from 49.1 in May. Analysts were expecting a reading of 49.1. The report is seen as a precursor for the national Institute for Supply Management report, to be released Tuesday.
The report helped lift the dollar, sending the 15-nation euro down to $1.5756 from $1.5775 on Friday.
But there was little expectation in the market that Monday's trading was the start of a turnaround in the dollar that would send oil falling much further. The dollar has weakened on expectations the Federal Reserve Board won't soon raise interest rates as the U.S. economy struggles with low growth. The Fed left its benchmark rate unchanged last week.
European Central Bank "president Jean-Claude Trichet's hawkish stance (on) inflation'' could mean the dollar may be headed for further weakness against the euro "and that's not bearish for oil,'' said The Schork Report edited by U.S. analyst and trader Stephen Schork. When other countries raise their interest rates, they are more competitive with U.S. rates, and that weakens the dollar.
Meanwhile, retail gasoline, which has been tracking oil higher, reached a new national average of $4.086 a gallon (about C$1.09 per litre), according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. The previous record of $4.08 was reached June 16; since then, oil has moved past $140 and been setting new records of its own.
In Canada, the average price for a litre of oil was about C$1.38 per litre, according to price monitoring website GasBuddy.com.
Geopolitical tensions, particularly surrounding Iran, also continue to boost oil prices. Traders were digesting reported comments from the commander of Iran's Revolutionary Guards, who warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles. In a report published Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also move to control a key oil passageway in the Gulf.
Iran is the world's fourth-largest oil exporter and about 60 per cent of the world's oil passes through the strategic Strait of Hormuz.
Global supply also remains a concern. The Iraqi government opened six oil fields to international bidding Monday as the nation attempts to boost daily production by 60 per cent.
The potential participation of big Western companies like BP PLC, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA in Iraq's oil industry has been criticized in recent weeks following published reports that several were close to signing no-bid contracts with the Iraqi government.
Those contracts were expected to be announced Monday, but Iraqi Oil Minister Hussain al-Shahristani instead named 35 companies that would be qualified to bid on service contracts for the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan.
A falling U.S. stock market has also led investors to seek higher-yielding investments such as oil and other commodities. The Dow Jones industrial average has fallen to its lowest level in nearly two years -- and is down nearly 20 per cent since its peak in October.
In other Nymex trading, heating oil futures rose 2.44 to $3.9310 a gallon while gasoline prices rose 1.47 cent to $3.5159 a gallon. Natural gas futures increased 9.3 cents to $13.291 per 1,000 cubic feet.
In London, Brent crude futures rose $1.04 to $141.35 a barrel on the ICE Futures exchange in London. Earlier Monday, the price for Brent had peaked at $143.91.
