Oil prices soared Friday past US$142 a barrel on expectations that the weakening U.S. dollar will continue its sharp decline.
Light sweet crude for August delivery rose as high as US$142.26 per barrel in pre-market electronic trading on the New York Mercantile Exchange. It later pulled back to US$141.14, up $1.50.
On Thursday, oil jumped more than five dollars -- passing the US$140 a barrel mark before closing at US$139.64.
Traders are growing in confidence that the U.S. dollar, whose drop in value has already contributed significantly to the rise of oil prices, will continue to soften.
The U.S. Federal Reserve is expected to not raise interest rates, which would help strengthen the U.S. dollar, until much later than expected.
Since investors fear the dollar will fall, many are getting out of stocks and instead, as a hedge against inflation, buying commodities like oil.
"The renewed attraction of commodities as an investment vehicle is contrasting with the unattractiveness of the stock market," Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said Friday.
In another boost for crude futures, OPEC's president said oil prices could go as high as US$170 a barrel this summer.
Libya also said it may cut oil production, adding to the price increase.
On Thursday, CIBC World Markets economist Jeff Rubin predicted in a report that gas prices in the U.S. will hit about US$7 a gallon -- the equivalent of C$1.86 a litre -- two years from now.
As a result, there will be about 10 million fewer vehicles on U.S. roads by 2012 and average kilometres driven will drop 15 per cent, said the report.
Another report Thursday, issued by Scotia Economics, said high gas prices are altering purchasing habits of consumers in a big way.
The change has resulted in Americans opting for smaller, more fuel-efficient cars instead of gas-guzzling SUV's and trucks.
With files from The Associated Press
