NEW YORK The price of crude oil hit yet another record on the last day of a tumultuous first half, spurting past $143 a barrel before ending lower on demand fears and a resilient dollar. Crude has shot up nearly 50 percent since the start of the year, in large part on the dollar's troubles, and analysts expect that trend to remain intact as the second half of 2008 begins.
A government report lowering oil and gasoline demand estimates and a dollar hanging tough nullified investor concerns over supply, a fragile global economy and continued tensions in the Middle East.
"What this shows is that demand destruction in the U.S. is a lot larger than previously thought," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "There are more signs that demand is deteriorating."
Light, sweet crude for August delivery lost 21 cents to settle at $140.00 a barrel on the New York Mercantile Exchange. In early electronic trading, the contract hit a record $143.67.
The Energy Information Administration reported that oil usage in April was lower than previously estimated, falling to 4.2 percent to 19.768 million barrels per day from 20.631 million. That was 3.9 percent lower than in April 2007 and the lowest level for the month in six years.
The price of oil, which began 2008 at $96 a barrel, has risen in part on expectations of higher demand in China and other developing nations. But its almost relentless advance has also forced consumers and businesses to cut back the amount of gas and oil they use; it is also posing a threat to U.S. economic growth that could further slice into demand.
A hardier dollar also sent oil prices lower on Monday. Often, oil futures are used as a hedge against a weaker dollar.
"A lot of the momentum from late last week was the expectation we would continue to see a weaker U.S. dollar. When that didn't materialize, we had some profit-taking," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The dollar rose against the 15-nation euro after the Chicago Purchasing Managers' index came in better than expected. The index for June rose to 49.6 from 49.1 in May, topping estimates of 49.1. The report is seen as a precursor for the national Institute for Supply Management report, to be released Tuesday.
But there was little expectation in the market that Monday's trading was the start of a turnaround in the dollar that would send oil falling much further. The dollar has weakened on expectations the Federal Reserve Board won't soon raise interest rates as the U.S. economy struggles with low growth. The Fed left its benchmark rate unchanged last week.
European Central Bank "President Jean-Claude Trichet's hawkish stance (on) inflation" could mean the dollar may be headed for further weakness against the euro "and that's not bearish for oil," said The Schork Report edited by U.S. analyst and trader Stephen Schork. When other countries raise their interest rates, they are more competitive with U.S. rates, and that weakens the dollar.
"If the Federal Reserve is powerless to raise interest rates because the economy continues to be soft, then we'll see low interest rates push oil higher," Flynn said.
Meanwhile, retail gasoline, which has been tracking oil higher, reached a new national average of $4.086 a gallon, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. The previous record of $4.08 was reached June 16; since then, oil has moved past $140 and been setting new records of its own.
Gasoline's surge higher has clearly affected consumer spending in the U.S. The concern is that the inflationary effects of higher oil and gas will force consumers to cut back their spending on non-essentials further in the months ahead.
Geopolitical tensions, particularly surrounding Iran, also continue to boost oil prices. Traders were digesting reported comments from the commander of Iran's Revolutionary Guards, who warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles. In a report published Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also move to control a key oil passageway in the Gulf.
Iran is the world's fourth-largest oil exporter and about 60 percent of the world's oil passes through the strategic Strait of Hormuz.
Global supply also remains a concern. The Iraqi government opened six oil fields to international bidding Monday as the nation attempts to boost daily production by 60 percent.
The potential participation of big Western companies like BP PLC, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell PLC and Total SA in Iraq's oil industry has been criticized in recent weeks following published reports that several were close to signing no-bid contracts with the Iraqi government.
Those contracts were expected to be announced Monday, but Iraqi Oil Minister Hussain al-Shahristani instead named 35 companies that would be qualified to bid on service contracts for the oil fields of Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan.
In other Nymex trading, heating oil futures slipped less than a cent to settle at $3.9029 a gallon while gasoline prices rose less than a penny to $3.5015 a gallon. Natural gas futures increased 15.5 cents to end at $13.353 per 1,000 cubic feet.
AP Business Writer Malcolm Foster in Bangkok, Thailand, and Associated Press Writer Pablo Gorondi in Budapest, Hungary, contributed to this report.