Oil Rises to Record Above $141 as Investors Buy Commodities

By Grant Smith

June 27 (Bloomberg) -- Crude oil rose to a record above $141 a barrel in New York and gold advanced as falling stock markets spurred investment in commodities.

Oil prices have gained almost 50 percent this year and gold 10 percent as recession concerns have pushed the MSCI World Index of global equity markets down 12 percent. Oil may rise further if the European Central Bank boosts interest rates on July 3, further weakening the U.S. dollar, traders said.

``It's a combination of equities underperforming and pricing in some further risk on what the ECB will do next week,'' said Oliver Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. Trading volumes are so low that price movements are being exaggerated, he said.

Crude oil for August delivery rose as much as $2.07 a barrel, or 1.5 percent, to $141.71 in electronic trading on the New York Mercantile Exchange. It was at $141.47 at 9:53 a.m. London time.

Yesterday, the contract rose $5.09, or 3.8 percent, to $139.64 a barrel, a record settlement price, as Libya threatened to cut output and OPEC's president said prices may reach $170 by the summer.

Gold headed for a second weekly gain as the dollar weakened, boosting the appeal of the metal as a hedge against inflation and an alternative investment to the U.S. currency. Gold for immediate delivery rose $2.01, or 0.2 percent, to $919.31 an ounce as of 9:08 a.m. in London.

The MSCI World Index lost 0.5 percent to 1,396.9 at 8:33 a.m. in London as 8 of the 10 industry groups retreated.

European Central Bank President Jean-Claude Trichet reiterated in a June 25 speech that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation.

The U.S. dollar was little changed at $1.5740 against the euro at 9:32 a.m. London time, and 0.5 percent weaker versus the Japanese currency at 106.36 per yen.

Brent crude oil rose as much $2.15, or 1.5 percent, to a record $141.98 on London's ICE Futures Europe exchange. The contract traded at $141.61 a barrel at 9:55 a.m.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net
Last Updated: June 27, 2008 04:57 EDT