NEW YORK - Oil futures surged to a new record near $94 Monday, propelled by the weak dollar and news that Mexico's state oil company had suspended a fifth of its oil production because of storms in the Gulf of Mexico.
Crude futures rallied late in the session as the euro rebounded against the dollar, analysts said. The euro hit a record high against the dollar early Monday, then declined only to rally backlater in the day.
"The dollar seems to be the force that's driving us now," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80 earlier, a trading record. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 abarrel then would be worth $96 to $101 or more today.
The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.
Oil prices were also supported by news that bad weather forced Mexico's Petroleos Mexicanos, or Pemex, to temporarily halt as much as 600,000 barrels of daily crude production and suspend efforts to fix a damaged valve line still spewing oil and natural gas almost a week after a platform-rig collision that killed at least 21 workers.
Pemex was forced to withdraw repair crews trying to plugthe line and contain the resulting spill, while the closure of Gulf ports forced the shutdown of 200,000 barrels of oil production on Sunday and an additional 400,000 on Monday.
The production won't be resumed "until the weather clears, until the ports open," said Pemex spokesman Martha Avelar. Offshore platforms like the one hit by a drilling rig last week normally send oil into holding tanks at Gulf seaports, where tankers ship it out.
The Mexican oil fields are expected to return to service later this week.
Oil prices have jumped 10 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. That news came amid rising political tensions in the Mideast.
Prices on Monday were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S.government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
Other Nymex energy futures were also higher. Gasoline for November delivery rose 5.34 cents to settle at $2.3274 a gallon, while November heating oil rose 3.21 cents to settle at $2.4646 a gallon.
November natural gas futures, which expired at the end of the Nymex session, rose 5.1 cents to settle at $7.269 per 1,000 cubic feet.
In London, December Brent crude rose $1.63 to settle at $90.32 a barrel on the ICE Futures exchange.
At the pump, the national average price of a gallon of gas rose 0.7 cent overnight to $2.856 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen nearly a dime in two weeks.
In Arkansas, the average price of a gallon of gasoline on Monday was $2.778, accordingto AAA.
Oil prices could get another boost this week if the Federal Reserve cuts interest rates.
"The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.
"There is not shortage of news that speculators can use now to push oil prices higher," said Fadel Gheit, an analyst at Oppenheimer & Co.
Information for this article was contributed by Mark Stevenson, George Jahn and Thomas Hogue of The Associated Press.
Business, Pages 21, 22 on 10/30/2007