Oil rose to a record near $112 this morning as a surprise weekend cut in the Federal Reserve discount rate and the sale of stricken US investment bank Bear Stearns sent the dollar to all-time lows.
US crude for April hit a fresh high of $111.80 a barrel. It was trading $1.15 up at $111.36 a barrel by 9.15am. May London Brent crude was $1.28 higher at $107.48.
The dollar plunged across the board today as the spiralling US financial crisis led to JPMorgan Chase acquiring Bear Stearns, stirring fears that more financial firms may become casualties.
The Federal Reserve took more emergency measures to stem the fast-spreading financial crisis, cutting its discount rate on Sunday and opening up discount window lending to major investment banks, a tool not used since the Great Depression.
The dollar slid 3 percent against the yen at one point to its lowest since 1995. The euro hit a peak against the dollar as investors became more convinced that the Fed and other major central banks may have to conduct coordinated dollar-buying intervention to stem the sell-off.
Fed policy-makers are set to meet tomorrow and are widely expected to lower the benchmark federal funds rate by up to a full-point.
Crude oil prices have risen by about 16 per cent so far this year. Key commodities include oil have hit record highs as investors have shifted money to hedge a weakening US dollar.
Ministers of the Organization of the Petroleum Exporting Countries maintain their view that high oil prices are not related to fundamentals, but are due to speculation and the US dollar's fall.
"There is no problem at all with world oil inventories," Kuwait's Oil Minister Mohammad al-Olaim said in comments published by state news agency KUNA today, echoing similar remarks on yesterday by OPEC President Chakib Khelil.