TOKYO—Oil jumped to a record above $111 a barrel on Monday, as a surprise weekend cut in the Federal Reserve discount rate and the fire sale of stricken U.S. investment bank Bear Stearns sent the dollar to all-time lows.
Crude for April delivery was up 95 cents at $111.16 a barrel by 10:35 p.m. EDT, after hitting $111.42 earlier. May London Brent crude was 55 cents higher at $106.75 a barrel.
"The recent oil prices have been swayed by the currency moves, including this latest rally to a record," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi. "The dollar weakness is the factor at the moment."
The dollar tumbled below 96 yen on Monday to a 13-year low, while the euro surged more than 1 percent to a record above $1.59 after JPMorgan Chase said it would acquire Bear Stearns for a fraction of its book value.
Fears that the credit crisis could claim more high-profile victims were underscored by the Fed cutting its discount rate to 3.25 percent from 3.5 percent effective immediately, putting that rate just a quarter point above the interbank overnight federal funds rate—the Fed's primary policy tool.
U.S. Fed policy-makers are set to meet on Tuesday and are widely expected to lower the benchmark federal funds rate by up to a full-point to try to put a floor under an economy many believe is already in the throes of recession.
Crude oil prices have jumped about 16 percent so far this year in part because of a steep decline in the U.S. dollar—a factor that has supported the nominal value of all commodities priced in the currency.
Oil analysts have said they expect oil's inverse relationship with the dollar to last until there are significant signs that underlying commodities demand is eroding because of the U.S. economic slowdown.
Adding support to energy markets, the Organization of the Petroleum Exporting Countries has shrugged off calls for more supply.
Oil markets are rising due to speculation and the U.S. dollar's fall, not on a lack of petroleum production, OPEC President Chakib Khelil said on Sunday, the official Algerian news agency APS reported.
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