Oil prices hit record again

March 6, 2008 12:25:47 PM PST
Oil prices seesawed Thursday as some investors collected profits from a rally that added 6.4 percent to crude's price in less than two days while others bought as the dollar reached new lows against the euro. Thursday brought a mixed slate of economic news. Although reports on same-store sales suggested some retailers are doing better than expected and the number of people filing for unemployment claims dropped last week, home foreclosures jumped in the fourth quarter to an all-time high, according to The Mortgage Bankers Association.

The European Central Bank and Bank of England, meanwhile, decided to leave interest rates unchanged.

The foreclosure data and European interest rate decisions helped push the dollar lower. Analysts believe the steadily weakening dollar is the reason oil prices have jumped to a number of new inflation-adjusted record highs this week. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

Still, after a big gain, investors often sell some positions to lock in profits, analysts said.

"I think it's profit-taking day, regardless of what the dollar is doing," said James Cordier, founder of OptionSellers.com, a Tampa, Florida, trading firm.

Light, sweet crude for April delivery fell 53 cents to $103.99 a barrel on the New York Mercantile Exchange, after earlier spiking to a new record of $105.97. Prices frequently alternated between gains and losses.

Keeping a floor under oil prices Thursday was an overnight rebel attack on a Colombian oil pipeline that transports 60,000 barrels of oil a day for export markets.

"The attack was in response to the Colombian military's killing of a high ranking member of the rebel group ... during a raid into Ecuador," said Addison Armstrong, director of exchange Traded Markets at TFS Energy Futures LLC in Stamford, Connecticut, in a research note. "The Transandino Pipeline may be out of service for up to three days following the explosion."

The attack came as traders worried about escalating tensions between Colombia and Venezuela over Colombia's raid into Ecuador. Venezuela moved tanks and soldiers to the Colombian border. Ecuador said Monday it had sent 3,200 soldiers to its border with Colombia.

In other Nymex trading, April heating oil futures fell 0.92 cent to $2.9339 a gallon, while April gasoline futures fell 3.46 cents to $2.6075 a gallon.

April natural gas futures fell 0.8 cent to $9.733 per 1,000 cubic feet. The Energy Department said inventories fell by 135 billion cubic feet last week, less than analysts had expected.

In London, Brent crude fell 38 cents to $101.26 a barrel on the ICE Futures exchange.

Diesel prices jumped 1.4 cents overnight to a new record national average of $3.71 a gallon. High diesel prices are boosting prices of consumer goods, the vast majority of which are transported by the distillate fuel.