Oil surged to a record near $110 a barrel today as the US dollar rallied after the Federal Reserve and other central banks injected liquidity into financial markets.
US crude settled up 85 cents at $108.75 a barrel after hitting $109.72. London Brent crude rose $1.09 to $105.25 a barrel, off a record $105.82.
US oil has touched record highs for five straight sessions as investors flock into commodities markets to hedge against inflation and the weak US dollar.
Oil eased off early highs after the US Federal Reserve and other central banks teamed up to get hundreds of billions of dollars in fresh funds to cash-starved credit markets.
The Fed move sent the dollar up from an all-time low against the euro.
Despite oil's record rally, analysts have said demand could be hurt by high prices and slower economic growth.
The International Energy Agency today forecast world oil demand would be less than expected this year, but said only a severe recession would push oil back below $60 a barrel.
"We are in an era of higher oil prices and so if we look at $100 oil we have to do so with an understanding that prices are unlikely to return to levels seen in the early part of the decade," said the IEA, adviser to 27 industrialized countries.
Some experts say fundamentals could tug down prices in the near-term, however. Goldman Sachs warned oil was at risk from substantial fund liquidation due to cyclical demand weaknesses in the next few months, but the investment bank remains constructive on energy for the long-term.
"We believe that the combination of low economic growth in the United States and high oil price inflation will have its strongest impact on demand in the first half of the year," the investment bank said in a research note.