Oil jumps to record high nearing $146

Oil briefly soared to a record high nearing $146 a barrel yesterday, but fell back after the European Central Bank held back from signalling further rate hikes, while rising unemployment in the US underlined the fragility of the economy there.

Market expectation was high that a combination of a weak dollar, lower US crude stocks and tension between Israel and Iran would push prices to $150 before the close of trade.

Prices were lifted to new highs by concerns over a larger-than-expected drop in US oil stockpiles, the threat of violent conflict with Iran and comments by Saudi Arabia's oil minister suggesting his country had no immediate plans to raise production.

By the afternoon in Europe, light, sweet crude for August delivery was up 51 cents on the day to $144.08 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it rose as high as $145.85 a barrel, a trading record.

The latest rise means a barrel of crude has gone up by more than 50 per cent since the end of last year, when oil was going for $96 a barrel.

In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before retreating to $144.68, up 42 cents. Speaking yesterday in Madrid, Saudi Arabia's Oil Minister Ali Naimi left the door open for increased output, but said the Kingdom's oil customers were satisfied and that no production growth was planned for now.

He stood by oil producers' explanation that oil prices are primarily boosted by financial markets and the weak dollar. He said oil prices were, to a lesser extent, fuelled by geopolitics, shortage fears and natural disasters. The statement echoes those of the Organisation for the Petroleum Exporting Countries, while consumers and foreign companies blame tight supplies or lack of access to resources.

Asked if Saudi Arabia was struggling to find buyers for its heavy crude at current prices, Naimi said clients are satisfied with the country's oil. The increase in oil prices coupled with the housing crisis and weak dollar has left the US economy reeling.