Weak dollar sends oil price to record high

A weakening dollar sent oil prices soaring to a new peak of almost $106 US dollars a barrel today.

The fresh record came after the US unveiled a surprise drop in supplies, and oil producing cartel Opec failed to lift production levels at its Vienna meeting.

Decisions by the Bank of England and European Central Bank to keep interest rates on hold also hit the faltering dollar, boosting oil prices.

Light, sweet crude for April delivery spiked at a record $105.97 in New York trading today, as the pound returned to the two-dollar mark and the euro also reached a new high above $1.53.

The US Energy Department reported that oil stocks fell 3.1 million barrels last week, defying analyst predictions of a rise for the eighth time in a row.

Today's oil price spike on the New York Mercantile Exchange follows a record run in recent weeks as US recession fears prompted investors to shift funds into oil instead as a hedge against a weakening dollar.

Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said: "The primary factor causing the surge in oil prices is the surprising drawdown in crude inventories, which caused traders to really react quite dramatically."

Oil futures are now more than $11 higher than the closing price four weeks ago. This time last year they were hovering around the $60 per barrel mark.

The price looks to have breached the inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 dollars a barrel then would be worth $96 to $103 or more today.

Tensions in the oil-producing nations of Colombia, Ecuador and Venezuela have further added to the price pressure.

It follows Colombia's weekend attack on rebels inside Ecuador, leading to both Ecuador and Venezuela stationing troops at its border with Colombia.