Oil Bubbling Up On Dive In Dollar

As the dollar falls and stocks swoon, investors are pumping up prices for oil, along with other commodities, as they seek safe havens. With OPEC holding the line on production, it looks like there’s no end in sight for the uptrend in black gold.

On Monday, light sweet crude for April delivery rose $2.75 to settle at a record $107.90 on the New York Mercantile Exchange after earlier hitting a new intraday record of $108.21.

“I don’t see a bottom right now,” said Georges Yared, an analyst at Yared Investment Research. “Not until the stock market calms down.”

Yared says he wouldn’t be surprised if the Federal Reserve pre-emptively cut rates before its March 18 meeting to stem the bloodletting. “The Fed wants to stay in front of this instead of being reactive as they have been in the past,” Yared said.

In the meantime, pension funds and hedge funds are betting on higher commodities prices.

But surging commodities have a downside too: inflationary concerns may keep the Fed from slashing key rates by as much as investors would like.

Exchange-traded funds that focus on oil stocks rose strongly Monday.

The United States Oil Fund (amex: USO - news - people ) rose 2.3%, or $1.90, to $85.63, while Barclay’s BK (nyse: OIL - news - people ) gained 1.7%, or $1.07, to $63.42. Macroshares Oil Up Tradeable (amex: UCR - news - people ) jumped 2.6%, or 80 cents, to $31.05; Powershares DB Oil Fund (amex: DBO - news - people ) shot up 1.6%, or 61 cents, to $39.28; and Powershares DB Energy Fund (amex: DBE - news - people ) inched upward 1.3%, or 52 cents, to $40.13.

The iShares Dow Jones Transportation Average (nyse: IYT - news - people ), an ETF that tracks the performance of the transporation index, fell 1.8%, or $1.47, to $79.08, as investors pulled out on concern over higher oil prices.