NEW YORK - Crude oil futures hit a record close to $140 a barrel Monday as the dollar weakened against the euro. Retail gas prices rose to a record $4.08 a gallon.
Light, sweet crude for July delivery rose to $139.89 before retreating to trade up $3.62 at $138.48 a barrel on the New York Mercantile Exchange.
Many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline is a major factor behind oil's doubling in price over the past year.
The euro bought $1.5504, a sizable increase from $1.5354 late Friday in New York. The British pound rose to $1.9668 versus $1.9469 in New York.
Also supporting prices was an overnight fire at a StatoilHydro ASA drilling rig in the North Sea, which could affect as much as 150,000 barrels of daily oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.
But prices of North Sea-produced Brent crude oil, while higher, were lagging Nymex crude's advance, suggesting to analysts that the dollar was the main driver of Monday's rally.
"We have a weaker U.S. dollar, and the buyers are out in force right now," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Saudi Arabia, the world's largest oil producer, told U.N. chief Ban Ki-moon over the weekend that it would boost output by 200,000 barrels a day, or by 2 percent, from June to July. In May, the kingdom raised production by 300,000 barrels a day. That increase was largely ignored by traders amid strong global demand and falling production elsewhere.
It appeared as if the same thing happened Monday.
"They have to increase by north of 1 million barrels per day (in order to have an impact on prices), and the market doesn't think they have it," Cordier said.
At the pump, meanwhile, the national average price of a gallon of gas rose 0.3 cent overnight to its latest milestone, according to AAA and the Oil Price Information Service. Gas prices are following crude prices higher, and likely have several more cents to rise before catching up with oil's latest advance. If oil prices pass $140 and head even higher, the pain consumers are feeling at the pump will intensify.
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Associated Press writers George Jahn in Vienna, Austria, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
