World oil prices rocket close to record heights near 135 dollars

ABS-CBN News

Posted at Jun 07 2008 01:15 AM | Updated as of Jun 07 2008 09:15 AM

Agence France-Presse

LONDON - Oil prices were catapulted close to record levels near 135 dollars per barrel on Friday as traders reacted to fresh weakness in the US currency after negative data on the American economy.

New York's main oil futures contract, light sweet crude for July delivery, surged as high as 134.68 dollars per barrel, close to its historic peak of 135.09 hit on May 22.

The contract later stood at 134.40 dollars, up 6.61 dollars from the close on Thursday.

Brent North Sea crude for July gained 5.55 dollars to 133.09 dollars a barrel, which was some way off the record 135.14 struck on May 22.

On the foreign exchange market on Friday, the European single currency jumped close to 1.57 dollars as traders digested news that the US unemployment rate soared to 5.5 percent in May.

The weakening dollar boosts oil prices because it makes crude cheaper for foreign buyers and therefore lifts demand, analysts said.

The US unemployment rate jumped unexpectedly by a half percentage point to 5.5 percent last month, the steepest increase in more than two decades, data from the US government's Labor Department showed on Friday.

The US economy shed 49,000 jobs in May, almost twice the number the prior month, to mark the fifth monthly drop in a row.

Both oil contracts had soared by almost five and a half dollars on Thursday as the market rebounded strongly from losses earlier this week.

Oil prices rallied Friday, "extending gains from the day before on heavy losses in the dollar," said analyst Andrey Kryuchenkov at the Sucden brokerage in London.

"It seems that many investors used the latest sell off in the dollar as an excuse to get back into the market after a bout of profit taking."

The euro began moving higher on Thursday after European Central Bank president Jean-Claude Trichet suggested that interest rates could increase in the eurozone as early as July to tackle rising inflation.

In Asia, price hikes have forced a growing band of countries to cut subsidies on fuel.

India, which imports 70 percent of its oil needs to feed its fast-growing economy, on Wednesday raised petrol prices by 11 percent and diesel by 9.4 percent based on pump prices in New Delhi.

Malaysia raised petrol prices 41 percent in a bid to curb its massive subsidies bill, following a similar move in Indonesia where fuel prices jumped by almost 30 percent.