Oil futures advanced to a record for a fifth day, rising above $109 a barrel in New York, as the sinking dollar drew investors to commodities.
The euro gained to $1.5489 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. Oil has advanced 13 percent this year as the tumbling dollar makes assets priced in the U.S. currency an appealing currency hedge.
``The weaker dollar has attracted a lot of investors into oil,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. ``At the same time, emerging market demand is strong.''
Crude oil for April delivery rose as much as $1.82, or 1.7 percent, to $109.72 in electronic trading on the New York Mercantile Exchange. The contract traded at $109.51 a barrel at 12:23 p.m. London time.
Brent crude for April settlement also rose to a fifth consecutive high, gaining as much as $1.66, or 1.6 percent, to $105.82 a barrel on London's ICE Futures Europe exchange.
Hedge-fund managers and other large speculators raised their bets that prices will rise last week. Bets on rising prices outnumbered so-called short positions by 99,539 contracts on the New York Mercantile Exchange, according to Commodity Futures Trading Commission data on March 7. That's the highest level since November.
Hedge Funds
Investments in commodity hedge funds rose to $104 billion at the end of 2007 from $73 billion in the first seven months of last year, according to data from Singapore-based research company Eurekahedge. Oil, industrial metals and wheat prices have rallied this year, while the S&P 500 and Dow Jones Industrial Average have dropped.
Oil rallied even as the International Energy Agency cut its forecast for 2008 global oil demand for a second month because high prices and weaker economic growth have ``weighed down'' demand growth in industrialized nations.
The agency, an adviser to 27 industrialized nations, reduced its forecast for 2008 demand 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.
New York crude's relative strength index, a measure of how rapidly prices have advanced or dropped during a specified period, rose above 70 for the first time since October. Readings above 70 indicate a price may be poised to fall, and readings below 30 indicate it may be poised to rise.
The 14-day relative strength index was at 71.18 as of 11:26 a.m. London time.
``As prices break highs on a daily basis with increasing volumes, these markets look overbought, but these are not normal trading conditions,'' said Rob Laughlin, senior broker at MF Global Ltd. in London. ``It will end in tears, but not yet.''
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