Oil prices surge upward

Oil prices jumped to their highest level in more than three months on Tuesday, rallying above $51 a barrel as traders focused on the declining value of the dollar, cold weather and the possibility of an OPEC production cut.

But if these factors provided the initial impetus for Tuesday's 6 percent runup, analysts said speculative buying by institutional investors was the force that kept it going.

After climbing as high as $51.40, light sweet crude for March delivery settled at $51.15 a barrel on the New York Mercantile Exchange, an increase of $2.80. The March contract expired Tuesday, but April crude also looked strong, settling at $51.42 a barrel.

The higher oil prices triggered widespread selling on Wall Street, but while the Dow Jones industrial average fell more than 170 points, the oil and gas sector performed better than most others. Shares of petroleum giant BP Plc rose 41 cents to $63.61, while those of Anadarko Petroleum Corp. rose 35 cents to $70.60.

Oil is 50 percent more expensive than a year ago, and prices for products derived from it are similarly high: unleaded gasoline averages $1.91 per gallon at the pump nationwide, according to the Energy Department.

"The big factor right now is the weak dollar," said Tom Bentz, a broker for BNP Paribas Commodity Futures. Crude oil is denominated in dollars, so the money the Organization of Petroleum Exporting Countries earns for every barrel does not stretch as far as it used to.

Moreover, as the dollar falls against other nations' currencies, it becomes that much less expensive to purchase crude oil in those countries, potentially raising demand.

Cold spells in Europe and the United States also propelled oil futures higher on Tuesday.

James Cordier, president of Liberty Trading Group in St. Petersburg, Fla., said crude's latest runup above $50 could be short-lived, as producers jump on the opportunity to sell their oil at these levels to lock in profits.

Still, well-financed investors appear to be having considerable influence these days. Data published by the Commodity Futures Trading Commission shows that speculators boosted their net long positions in the week ended Feb. 15, while scaling back their short positions. A long position is a bet that futures will rise and a short position is a gamble that prices will fall.

Cordier said he does not expect OPEC to announce another production cut, noting that the cartel has yet to fully enact the 1 million barrel a day output cuts promised late last year.