Persistent worries about tight supplies ahead of the winter peak season and fresh geopolitical tensions also helped to push prices higher.
Nymex November West Texas Intermediate hit a session high $90.07 a barrel before falling back. By midday in London the contract was 24 cents higher at $88.71. It closed $2.07 higher in New York at $89.47, a sixth straight trading day that oil set a record high.
The rising oil price also helped push spot gold in London to a fresh 28-year high of $771 per ounce.
Edward Morse, chief energy economist at Lehman Brothers in New York, said that speculators betting on further US dollar weakness ahead of the G7 meeting this weekend and the US Federal Reserve on October 31 were propping up the oil price.
The dollar traded on Friday to $1.4303 against the euro, after touching earlier a record low of $1.4311. Investors are betting on a further interest rate cut when the Fed meets.
A lower dollar suggests that producing countries, such as Saudi Arabia, may try to keep the oil price higher to compensate for more expensive imports priced in other currencies. The strength of the euro, sterling and other currencies also mean that some countries, particularly in Europe, are partially insulated from the oil price rally.
David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said: ”The dollar fell to new lows overnight. That fact has been a boost to all commodity prices.”
The Nymex December West Texas Intermediate contract, which will become the oil market benchmark early next week, traded at $88.01 a barrel, after hitting $88.49.
Nauman Barakat, senior vice-president at Macquarie Futures in New York, warned that traders have built massive December options calls – rights to buy oil at a certain price – at $90 and $100 a barrel, providing the backdrop for ”additional upward impetus.”
Kevin Norrish of Barclays Capital said that the issue no longer seemed to be whether oil will reach $100 a barrel, but when.
”Until there is a clear prospect of the [supply-demand] gap being filled, then the course is set for the market to take out $90, $100 and $110 in fairly quick succession,” Mr Norrish said.
Low crude oil inventories ahead of the winter season are also supporting prices, traders said.
OECD crude oil and products stocks have fallen below their five-year average, after inventories suffered a counter-seasonal drop in the third quarter.
The IEA estimates that between July and September, inventories fell at a rate of 360,000 barrels a day, sharply diverging from a 10-year average of increases in that period of about 260,000 b/d.
Inventories at Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange crude oil contract, are running 19 per cent below last year.
The Organisation of the Petroleum Exporting Countries, which controls 40 per cent of the world’s crude oil output, denies that the market is tight, instead blaming speculation, the weakening of the dollar and Middle East tensions for the 13 per cent jump in prices in the past week.
The price surge could force Opec to call for an emergency meeting ahead of its head of states’ summit in Riyadh, Saudi Arabia, in late November, and its ministerial meeting in Abu Dhabi in early December.
Saudi Arabia, the cartel’s leader, has remained silent on whether to increase production further, but at the last Opec meeting it pushed for a production boost in spite of strong opposition from other countries, suggesting the kingdom is concerned about the impact of high oil prices on the global economy.
Opec officials said the cartel’s ministers were just returning from holidays after the end of Ramadan, implying it may take extra time for the group to discuss a new production increase.