Oil surges more than $9 to record $137

Reuters
Friday, June 6, 2008

NEW YORK, June 6 (Reuters) - Oil roared more than $9 higher to a record over $137 a barrel on Friday on the weaker dollar, tensions between Israel and Iran, and a Morgan Stanley forecast that falling U.S. stockpiles could send crude to $150 by July 4.

U.S. crude surged $9.00 to $136.79 a barrel by 1:23 p.m. EDT (1723 GMT), off a record $137.70 hit earlier in the session. London Brent crude rose $8.51 to $136.05.

Oil has surged this year in part due to an influx of cash from investors seeking a hedge against the weaker dollar and inflation.

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The greenback weakened against other currencies on data showing the U.S. economy lost jobs for the a fifth straight month and the unemployment rate shot up to its highest in more than three years.
The drop added to losses from Thursday when European Central Bank President Jean-Claude Trichet said a number of policymakers wanted higher interest rates -- possibly as soon as next month -- stoking a $6 jump in crude.

Further support came from remarks by Israel's transport minister that an attack on Iran's nuclear sites looked "unavoidable," the most explicit threat yet against Tehran from Prime Minister Ehud Olmert's government.

Worries of a potential disruption of the OPEC member's crude supply have helped support prices over the past year.

"Trichet is making the situation a lot worse than it would've been," said Phil Flynn, analyst at Alaron Trading in Chicago. "The unemployment report looks all the more ominous. And any talk of war with Iran will set the bulls on fire."

Morgan Stanley forecast the diversion of Middle East oil shipments away from the United States to Asian markets could push U.S. crude to a $150 a barrel by the U.S. July 4th holiday.

"Middle East oil exports are stable, but Asia is taking an unprecedented share," Morgan Stanley said in a report, adding U.S. inventories have dropped by 35 million barrels since March.

"Robust Asian non-OECD demand growth, coupled with a stagnant global oil supply backdrop appears to be pricing out Atlantic basin consumerers while at the same time driving Atlantic inventories to critically low levels."

The report added to a string of upward price forecast revisions by analysts, with Goldman Sachs in May predicting prices could tip $200 a barrel within the next two years.

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