May 9 (Bloomberg) -- Crude oil rose above $126 a barrel in New York to a record as the dollar weakened against the euro and yen, prompting investors to buy commodities as a hedge against the currency's decline.

Oil climbed to all-time highs for a fifth day as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation. Nigerian output fell to the lowest this decade in April because of a strike and attacks on oil installations.

``Oil is a safe haven because of the weak dollar and how badly the financial sector has been doing,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There are also geopolitical concerns about places like Nigeria and Venezuela that are propping prices up.''

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Crude oil for June delivery rose $1.32, or 1.1 percent, to $125.01 a barrel at 10:56 a.m. on the New York Mercantile Exchange. The contract surged to a record $126.20 today. Prices are up 7.5 percent this week, the biggest weekly gain in more than a year. Futures are more than double from a year ago.

Brent crude oil for June settlement climbed $1.85, or 1.5 percent, to $124.69 a barrel on London's ICE Futures Europe exchange. The contract touched $125.90 today, the highest since trading began in 1988.

Oil at $200 is ``possible if we have a continuing devaluation of the dollar with respect to other currencies,'' OPEC President Chakib Khelil said yesterday at a press conference in Washington.

The dollar dropped 10 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB has left rates unchanged.

Fed Policy

``Fed policy is accommodating the rise in energy prices,'' said Bill O'Grady, director of fundamental futures research at Wachovia Securities in St. Louis. ``The Fed and federal government are putting more liquidity in people's pockets, which is being spent on expensive oil.''

The U.S. government started sending $117 billion in tax rebate checks last week as part of its fiscal stimulus plan.

Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that ``the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

``There's been a paradox, prices have surged over the last week while we've had bearish headlines,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Clearly there's been a lot of fund buying on the back of Goldman's super-spike repot. They were right on the nose last time.''

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