BANGKOK, Thailand - Oil prices climbed to US$142 a barrel Tuesday amid concerns about tensions between Iran and Israel and a weakening dollar.
"You have supply-side concerns, such as the rhetoric on Iran, that will likely keep a floor under prices,'' said Victor Shum, an analyst with Purvin & Gertz in Singapore. "I don't see much resistance to $150, which could happen in the coming weeks.''
Late afternoon in Singapore, light, sweet crude for August delivery was up $2.00 at US$142.00 a barrel in Asian electronic trading on the New York Mercantile Exchange.
On Monday, the contract soared to a record US$143.67 a barrel. It later fell back to close at US$140.00 on reports of weakening U.S. oil demand and end-of-the-quarter profit-taking by traders.
Oil also rose on expectations the European Central Bank will likely raise interest rates at its next meeting on Thursday, a move that would help strengthen the euro against the dollar, Shum said.
As the dollar has weakened, investors have been piling into oil contracts, betting that they will gain, thereby offsetting the dollar's decline. Since the start of the year, crude has shot up nearly 50 per cent.
The dollar fell to 105.44 yen from 106.10 yen late Monday, while the euro rose to $1.5771 from $1.5757.
Traders were still anxious about tension in the Mideast after the commander of Iran's Revolutionary Guards warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles and that it would control a key oil route in the Gulf.
Those comments, reported Saturday in Iran's conservative Jam-e-Jam newspaper, came after an Israeli military exercise over the Mediterranean Sea that was seen as sending a message to Iran to curb its nuclear ambitions.
Iran is the world's fourth-largest oil exporter and OPEC's second-largest exporter. About 40 per cent of world oil exports pass through the Gulf.
Traders were also digesting news from the Energy Information Administration, which reported Monday that U.S. oil usage in April was lower than previously estimated, falling 4.2 per cent to 19.768 million barrels per day from 20.631 million. That was 3.9 per cent lower than in April 2007 and the lowest level for the month in six years.
"We're starting to see demand destruction in the U.S., but in China and other developing countries, we still see demand growth,'' Shum said. "It could take several months before recent fuel price hikes in developing countries start to slow oil demand in those places.''
In other Nymex trading, heating oil futures rose 5.06 cents to US$3.96006 a gallon while gasoline prices rose 3.84 cents to $3.5375 a gallon. Natural gas futures increased 3.2 cents to US$13.385 per 1,000 cubic feet.
In London, Brent crude futures were up $2.17 at $142.00 on the ICE Futures exchange.
