(CBS/AP) Oil futures surged to a new record near $94 Monday, propelled by the weak dollar and news that Mexico's state oil company had suspended a fifth of its oil production due to stormy weather.
Crude futures rallied late in the session as the euro rebounded against the dollar, analysts said. The euro hit a record high against the dollar early Monday morning, then declined only to rally back later in the day.
"The dollar seems to be the force that's driving us now," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.
Oil prices were also supported by news that Mexico's Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production.
"Mexico shut in production for a few days," which will likely disrupt imports and cut domestic oil inventories, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
The Mexican oil fields are expected to return to service later this week.
At the pump, the average price of gasoline is up 11 cents in the past three weeks, to $2.87 a gallon, reports CBS News correspondent Nancy Cordes.
Experts say it's just good timing that the price of gas isn't up even more. It's October, so summer driving season is over and Americans are demanding less gas. But, they warn if oil prices stay this high through next spring, $3.50 or even $4 dollars a gallon would not be out of the question, Cordes adds.
Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80 earlier, a trading record. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
Oil prices have jumped 10 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. That news came amid rising political tensions in the Mideast.
Prices on Monday were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
Other Nymex energy futures were also higher. Gasoline for November delivery rose 5.34 cents to settle at $2.3274 a gallon, while November heating oil rose 3.21 cents to settle at $2.4646 a gallon.
November natural gas futures, which expired at the end of the Nymex session, rose 5.1 cents to settle at $7.269 per 1,000 cubic feet.
In London, December Brent crude rose $1.63 to settle at $90.32 a barrel on the ICE Futures exchange.
Oil prices could get another boost this week if the Federal Reserve cuts interest rates.
"The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.
"There is no shortage of news that speculators can use now to push oil prices higher," said Fadel Gheit, an analyst at Oppenheimer & Co.