NEW YORK: Oil prices rose above $110 a barrel Thursday for the first time since September 2008 after another earthquake hit Japan and the European Central Bank, fearful of inflation, raised a key interest rate. Benchmark West Texas Intermediate crude oil for May delivery gained $1.47 to $110.30 per barrel in afternoon trading on the New York Mercantile Exchange. In London, Brent crude gained 27 cents at $122.20 per barrel on the ICE Futures exchange. Crude has traded near $108 this week as traders mull the impact of the ongoing turmoil in Libya, a weakening US dollar and China's fourth interest rate hike since October. Investors are also concerned that a 29 percent jump in oil prices since mid-February will force consumers to spend more on fuel costs and will eventually undermine crude demand. A weaker dollar makes commodities like oil priced in dollars cheaper and more attractive for investors holding other currencies, often leading to higher oil prices. During midday trading in New York Thursday, the dollar fell to 84.88 Japanese yen from 85.47 yen late Wednesday. The euro fell to $1.4289 from $1.4336 late Wednesday. Morning trading was volatile, with the euro rising over $1.43 before and after the European Central Bank said it was raising its main interest rate by a quarter of a percentage point. It fell below the $1.43 mark in later trading. “The impact of a stronger euro will likely fuel commodity prices even higher over the balance of the week, although in energy's case, prices are starting to get dangerously high, and have gotten to a point where yet another inflationary spiral could be unleashed, particularly in emerging markets,” said Edward Meir of MF Global in New York. “As prices move up, the prospect of creeping demand destruction in energy now seems to be more likely,” Meir concluded. In other Nymex contracts for May delivery, heating oil lost 1.48 cents to $3.2060 per gallon and gasoline futures lost 0.64 cents at $3.1865 per gallon. The natural gas contract for May delivery lost 8.9 cents at $4.057 per 1,000 cubic feet on the New York Mercantile Exchange. Earlier, natural gas lost as much as 11 cents, or 2.6 percent. The Energy Information Administration reported that natural gas stocks dropped by 45 billion cubic feet last week, less than anticipated. Analysts had expected a drop of between 49 to 53 billion cubic feet.
