NEW YORK --- Crude oil futures nearly approached $140 a barrel Monday, June 16, despite Saudi Arabia's promise to boost production, the Associated Press reported. Meanwhile, retail gas prices rose to a record $4.08 a gallon.
Light, sweet crude for July delivery reached a record of $139.89 before falling back to $137.25 a barrel on the New York Mercantile Exchange.
Many investors are drawn to commodities such as oil as a hedge against inflation when the value of the dollar falls. Also, a weakened dollar makes oil more affordable to investors dealing in other currencies.
Also affecting prices was an overnight fire at a StatoilHydro ASA drilling rig in the North Sea. However, prices of North Sea-produced Brent crude oil, while higher, were lagging Nymex crude's advance. This led analysts to surmise that the dollar was the main reason for Monday's rally. In London, August Brent crude futures rose $2.01 to reach $137.12 a barrel, AP reported.
"We have a weaker U.S. dollar, and the buyers are out in force right now," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Saudi Arabia informed U.N. Chief Ban Ki-moon over the weekend that it would boost output by 200,000 barrels a day, or by 2 percent, from June to July. In May, the kingdom raised production by 300,000 barrels a day.
But traders largely ignored that promise of a production increase, instead focusing on the strong global demand and falling production elsewhere.
"Saudi Arabia's proposed output addition will only go some way in offsetting the significant output losses in other OPEC nations like Nigeria," said Barclays Capital analyst Kevin Norrish in a research note.
Cordier said Saudi Arabia has "to increase by north of 1 million barrels per day" to have an impact on prices, "and the market doesn't think they have it," AP reported.