Oil Rises to Record for Fifth Day in New York on Weak Dollar.

By Mark Shenk

March 11 (Bloomberg) -- Crude oil rose to a record for a fifth day, climbing above $109 a barrel in New York, after the weak dollar prompted traders to invest in commodities.

The euro rose to $1.5495 against the dollar, the highest since the single currency's introduction in 1999, after European Central Bank council member Axel Weber said he doesn't see any leeway to lower borrowing costs. The dollar rebounded from the day's low after the Federal Reserve said it will lend up to $200 billion of Treasury securities in exchange for debt.

``This is all about the dollar,'' said Adam Sieminski, Deutsche Bank's chief energy economist in New York. ``To a lot of the world the rise in prices isn't that severe because of the falling dollar. Also OPEC has no incentive to rein in prices with the dollar dropping.''

Crude oil for April delivery rose 85 cents, or 0.8 percent, to settle at $108.75 a barrel at 2:46 p.m. on the New York Mercantile Exchange, a record close. Futures surged to $109.72 a barrel today, the highest since trading began in 1983.

Brent crude for April settlement rose $1.09, or 1.1 percent, to close at a record $105.25 a barrel on London's ICE Futures Europe exchange. Futures reached a all-time high intraday price of $105.82 a barrel today.

``The decline of the dollar has a lot to do with the rise in prices,'' said Frank Verrastro, director of the Center for Strategic and International Studies energy program in Washington. ``People are looking at the oil market as a safe place to park their money in this time of economic uncertainty. The end users of oil are not major participants in this market.''

Bernanke's Efforts

Today's steps by the Federal Reserve are the latest in Chairman Ben S. Bernanke's effort to alleviate increasing strains in financial markets that are curtailing credit available to homeowners and companies.

``Oil prices have come off on the central bank action to add liquidity, which has strengthened the dollar,'' said Tom Bentz, a broker at BNP Paribas in New York. ``The trend is still up and it will take a lot more to break the back of this rally.''

The U.S. Dollar Index, a weighted gauge against the euro, yen, pound and three other currencies, fell to the lowest since the basket started trading in 1973 on March 7. The index touched 72.474 today, just short of the record low of 72.462.

``We started the year with the dollar index at 76 and the drop to 72 has been good for a $15 gain in oil,'' Sieminski said, ``When the index hits 70 the price of oil will hit $120.''

Ministers from the 13-nation Organization of Petroleum Exporting Countries have said the drop in the dollar against currencies such as the euro and yen justifies higher oil prices.

In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil benchmark, is up 81 percent from a year ago. Oil is up 55 percent in euros, 74 percent in British pounds and 58 percent in yen.

Demand Forecast

The International Energy Agency, an adviser to 27 developed nations, cut its forecast for 2008 global oil demand for a second month as record prices curbed consumption in some parts of the world. The agency reduced its forecast by 80,000 barrels a day to 87.54 million barrels a day, leaving annual demand growth at 2 percent, the IEA said today in a monthly report.

``It's a bubble and eventually it will burst,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``The fundamentals aren't supportive of these prices. Today's IEA report sure looks bearish to me.''

OPEC left production targets unchanged on March 5 when officials met in Vienna, giving 12 of its 13 members a combined quota of 29.67 million barrels a day. The group pumped 32.1 million barrels a day in February, down by 120,000 barrels a day from revised January levels, according to the IEA.

White House Comment

White House spokeswoman, Dana Perino, said the administration of President George W. Bush is ``very concerned'' about high crude oil prices. ``We know it's impacting America's consumers and small businesses especially,'' she told reporters traveling with the president to Nashville aboard Air Force One.

``It would be wrong of the president to provide false hope to people who think that we are going to be able to have an immediate impact to reduce gas prices,'' Perino said. ``This is something that we're all going to have to work through.''

Gasoline for April delivery rose 1.12 cents, or 0.4 percent, to a record close of $2.7261 a gallon in New York. Futures touched $2.7435 earlier today, an intraday record for gasoline to be blended with ethanol, known as RBOB, which began trading in October 2005.

Pump prices are following futures higher. Regular gasoline, averaged nationwide, rose 0.5 cent to $3.227 a gallon yesterday, AAA, the nation's largest motorist organization, said. That matches the record reached on May 24.

Last Updated: March 11, 2008 15:35 EDT