Oil rockets to new high above $135 on supplies

May 22, Reuters

TOKYO - Crude oil soared to a fresh record high above $135 per barrel on Thursday as a surprise drawdown in U.S. crude oil inventories and a weaker dollar prompted heavy fund inflows into the market.

Investment funds flocked into the market based on its strong performance, with key U.S. crude oil having surged more than 20 percent since the start of the month and geopolitical and supply concerns keeping traders reluctant to sell.

Recent bearishness towards the dollar added momentum to the oil market, as the dollar's weakness increases the purchasing power of buyers holding other currencies.

The front-month July NYMEX crude contract rose to a record high of $135.04 a barrel on the Globex electronic trading platform, up 1.4 percent from the New York settlement.

As of 0131 GMT, it was trading up $1.68 or 1.26 percent at $134.85, after settling up $4.19 or 3.3 percent at $133.17 in New York.

"The huge draw in crude inventories was surprising. All the focus is on bullish factors. You simply have to follow the trend and buy now," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.

"You really cannot forecast how much further the market will rally now. All I can say is the market will continue to rise," Kageyama said.

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photo: Traders work on the floor of the New York Mercantile Exchange May 21, 2008 (REUTERS/Shannon Stapleton)