Oil jumps $4 to record over $120 on weak dollar

Mon May 5, 2008 3:37pm EDT
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By Matthew Robinson

NEW YORK (Reuters) - Oil jumped more than $4 to a record high over $120 a barrel on Monday on the weaker U.S. dollar and supply concerns from OPEC members Nigeria and Iran.

U.S. crude settled up $3.65 at $119.97 after surging as high as $120.36. London Brent crude rose $3.43 to $117.99 in light trade due to a bank holiday in Britain, after hitting $118.58 a barrel.

"People are piling back up on crude oil due to the weakness of the dollar and production issues in Nigeria," said Phil Flynn, analyst at Alaron Trading in Chicago. "But it also looks like momentum play after Friday's positive reaction to the unemployment report."

U.S. government data released Friday that showed U.S. payrolls fell by 20,000 jobs in March, a quarter of the losses expected, helping to counter concerns that the weaker U.S. economy could drag down oil demand.

The dollar fell broadly on Monday, however, as forex investors decided the world's biggest economy was still struggling. A Monday report from the Institute for Supply Management showed the U.S. service sector grew unexpectedly in April.

Further support for oil came from Iran's announcement on Monday it would not consider any incentives offered by world powers that would constrain its right to nuclear technology.

The comments come just three days after major powers said they would make a new offer to convince the Islamic republic to halt its nuclear plans. The West believes Tehran wants to build nuclear weapons.

Iran's standoff with the West over its nuclear program added geopolitical concerns and fundamental tightness last year that sent crude to new highs.   Continued...

<p>A customer pumps gas at a Mobil gas station in Medford, Massachusetts, April 30, 2008. REUTERS/Brian Snyder</p>