Oil prices jumped to a record $111 a barrel on Thursday, extending a rally that has added nearly 30 percent to prices in just over a month, amid all-time weakness in the dollar. US crude for April delivery settled up 41 cents at $110.33 a barrel, after striking the new high of $111.00 earlier.
London Brent crude for April, which expires Friday, rose $1.27 to $107.54 a barrel. Oil's surge comes as fears of a recession pummel the value of the US dollar - a factor that has propelled the nominal price of virtually all commodities traded in the currency, despite the risk of a slowdown in underlying consumption.
"The relation between the weak dollar and strong crude continues to dictate price direction at the moment, and people are not trading on economic fears," said oil analyst Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
The dollar dropped to a 12-year low against the yen and a record low versus the euro Thursday on uncertainty about the long-term effect of the Federal Reserve's efforts to ease strained credit and money markets.
"Commodities are likely to have been the key beneficiary of the aggressive Fed rate-cutting cycle," Citigroup said in a research note. Adding to oil's strength, the Organisation of Petroleum Exporting Countries has shrugged off calls from consumer nations for more oil to pull prices back from their peaks. "There is no shortage in supplies ... Actually, supplies are very comfortable," Qatar's oil minister, Abdullah al-Attiyah, told Al Jazeera television when asked about record prices.
"Investors have felt extreme pressure, so they headed to oil and gold, after losing confidence in stock markets, property markets, bonds and others," he said. A US government report on Wednesday showed domestic crude stocks rose more than expected last week to the highest since November, while gasoline stocks rose to a 15-year high.
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