SINGAPORE - Oil prices rose to an intraday trading record above $112 a barrel Tuesday after the U.S. dollar fell further and crude supplies to the U.S. and elsewhere were disrupted.
The main driver of crude's rally was a decline in the greenback relative to the euro on Monday, analysts said. Crude oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating U.S. currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.
"We've seen another swing down in the U.S. dollar so I think we saw short-term traders go back into oil as a hedge against the falling dollar," said Mark Pervan, senior commodity strategist at the ANZ Bank in Melbourne, Australia.
Light, sweet crude for May delivery rose to $112.48 a barrel in electronic trading on the New York Mercantile Exchange, surpassing the previous trading record of $112.21 set last week.
The contract later retreated to $112.16 a barrel, up 40 cents from Monday's record close of $111.76 a barrel.
News Monday from U.S. bank Wachovia Corp. supported oil prices by making the dollar less attractive, said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Wachovia, the fourth largest bank in the U.S., reported a hefty first-quarter loss and cut its dividend, and said it was forced to seek a $7 billion cash injection to make up for a poorly timed expansion of its mortgage business.
"This news highlights the strains in the banking sector and credit markets and that has led to more dollar selling, and so that tends to drive investors into oil and other commodities," Shum said.
He said the news from Wachovia as well as disappointing first-quarter results from General Electric Co. on Friday overshadowed concerns raised by the Group of Seven industrialized nations about the dollar's fall. The G-7 remarks were seen as a warning by some analysts that the group may be contemplating an intervention that could lessen crude's attraction as an inflation hedge and send it lower.
Crude was also supported by news of disruptions to oil supplies, though analysts said the disruptions were minor.
"They only look like temporary shutdowns but ... the combination of that and the fact that the dollar was off again was the key," Pervan said.
The Capline pipeline — the Royal Dutch Shell PLC conduit that carries 1.2 million barrels of crude each day from the U.S. Gulf Coast to the Midwest — was closed on the weekend but has since resumed operations at a slightly reduced capacity.
In Nigeria, Italian energy giant ENI reported a 5,000 barrel per day reduction in production at one of its facilities.
In other Nymex trading, heating oil futures added 1.31 cents to $3.216 a gallon while gasoline prices rose 0.63 cent to $2.8281 a gallon. Natural gas futures gained 6.7 cents to $10.12 per 1,000 cubic feet.
In London, Brent crude futures rose 55 cents to $110.39 a barrel on the ICE Futures exchange.