(Updates prices, recasts, adds fresh quotes)
By Matthew Robinson
NEW YORK, June 6 (Reuters) - Oil jumped $10 to a record
over $138 a barrel on Friday, extending a two-day rally to more
than $15 on the slumping U.S. dollar and rising tensions
between Israel and Iran.
Morgan Stanley forecast falling U.S. inventories could send
U.S. crude to $150 a barrel by July 4 amid signs record high
prices at the pump are already cutting into demand at the start
summer vacation driving season in the world's top consumer.
U.S. crude <CLc1> gained $10.28 to $138.07 a barrel by 2:20
p.m. EDT (1820 GMT), adding to gains of more $5.49 on Thursday.
London Brent crude <LCOc1> rose $9.66 to $137.20.
Oil has surged this year in part due to an influx of cash
from investors seeking a hedge against the weaker dollar and
inflation.
The greenback weakened against other currencies on data
showing the U.S. economy lost jobs for the a fifth straight
month and the unemployment rate shot up to its highest in more
than three years. []
The drop added to losses from Thursday when European
Central Bank President Jean-Claude Trichet said a number of
policymakers wanted higher interest rates -- possibly as soon
as next month. []
Further support came from remarks by Israel's transport
minister that an attack on Iran's nuclear sites looked
"unavoidable," the most explicit threat yet against Tehran from
Prime Minister Ehud Olmert's government. []
Worries of a potential disruption of the OPEC member's
crude supply have helped support prices over the past year.
"We've had a huge historic rally on little fundamental
input, other than the weakness of the dollar and the news this
morning out of Israel that seems to have pushed some
geopolitical risk premium back in the market," Jim Ritterbusch,
president of Ritterbusch & Associates in Galena, Illinois.
Morgan Stanley forecast the diversion of Middle East oil
shipments away from the United States to Asian markets could
push U.S. crude to a $150 a barrel by the U.S. July 4th
holiday.
"Middle East oil exports are stable, but Asia is taking an
unprecedented share," Morgan Stanley said in a report, adding
U.S. inventories have dropped by 35 million barrels since
March.
"Robust Asian non-OECD demand growth, coupled with a
stagnant global oil supply backdrop appears to be pricing out
Atlantic basin consumerers while at the same time driving
Atlantic inventories to critically low levels."
The report added to a string of upward price forecast
revisions by analysts, with Goldman Sachs in May predicting
prices could tip $200 a barrel within the next two years.
A six-year rally in oil has sent prices up six-fold as
demand from emerging economies such as China and India strain
supplies.
High prices have started to eat away at global growth
however, with some consumers such as the United States and the
United Kingdom showing signs of lowering consumption.
Some Asian governments -- including India -- have decided
to cut fuel subsidies, stirring concern rising prices could cut
further into demand.
The International Energy Agency (IEA), an adviser to 27
industrialised countries, said it may cut issues its latest its
2008 demand growth projection further after having already more
than halved it to 1.03 million barrels per day (bpd).
(Additional reporting by Gene Ramos and Robert Gibbons in New
York; Alex Lawler and Santosh Menon in London; Maryelle
Demongeot in Singapore; Editing by Christian Wiessner)
