Oil rises over $131 as dollar weakens - Emirates24|7

Oil rises over $131 as dollar weakens

Oil edged higher on Friday, spurred on by a weaker US dollar and nagging concerns that stagnating output in Russia and other producers outside OPEC could lead to a supply squeeze.

US light crude rose 53 cents to $131.34 a barrel by 1630 GMT. It surged to a record $135.09 on Thursday before slumping to settle at $130.81, the first loss in five sessions.

London Brent was up 68 cents to $131.28.

Oil prices have climbed by around a third since the start of the year, driven upwards by worries about that world production is falling short of demand and the weakening dollar, which prompted investors to use oil as a hedge against the falling currency.

The dollar looked set on Friday for its steepest weekly fall against a basket of major currencies in two months on concerns about the US economy's vulnerability to slower growth and rising inflation.

Oil production from countries outside OPEC is stagnating and forecast to remain below 50 million barrels per day this year, at 49.56 million bpd, lower than earlier forecast, a Reuters survey of 12 analysts showed on Thursday.

"The severity of non-OPEC supply weakness stands out as a primary factor behind the strong run-up in prices through the year so far," Barclays Capital said in a research note.

The failure of non-OPEC producers to increase output significantly has also sent long-term prices even higher, at close to $150 a barrel.

OPEC Secretary-General Abdullah al-Badri on Thursday repeated the group's stance that it can do nothing to lower oil prices in a "crazy" market, blaming record prices on factors such as geopolitical tensions, speculation and the weak dollar.

High oil prices may be set to dent demand as major Asian consuming countries review costly fuel subsidies that cushion drivers from higher costs.

"In many ways you are starting to see a demand response," said Lawrence Eagles of the International Energy Agency.

In a sign that Americans are curbing their driving in the face of high gasoline prices, US data released on Friday showed that highway miles driven in March fell 4.3 per cent from a year earlier.

The fall was the first March decline since the last major oil shock in 1979.

Road travel in the United States during the Memorial Day holiday this weekend is expected to be 1 per cent lower than last year, the first decline since 2002.