Oil above $134 on weak inventory

Some investors are switching into oil as a hedge against the weak dollar

Oil prices have bolted to a new record high, touching $134 a barrel, on concerns about low US crude stockpiles and the weak dollar.

US light, sweet crude for delivery in July rose $5.05 to $134.15 a barrel before falling back to $133.17.

Meanwhile, oil for delivery in 2016 rose above $142 - suggesting that this is the price firms expect to be paying in eight years' time.

Two weeks ago, Goldman Sachs said that a barrel could fetch $200 by 2010.

London Brent also headed higher, up $4.86 to $132.70 a barrel after surpassing $133 in earlier trading.

In recent weeks, the rise in the oil price has been attributed to worries about supply.

Concerns were exacerbated by a US government report showing crude stocks fell by more than 5 million barrels last week countering expectations of a rise and sent the oil price higher.

"This report gives the market every reason to rally," said Rob Kurzatkowski, an analyst at US online stockbroker optionsXpress.

China factor

The weakness of the US dollar is also driving the oil price higher as investors look to buy commodities as a hedge against the currency, observers say.

"We've seen an about-face turn on the dollar in the last couple of days," said Mark Pervan, a Melbourne-based senior commodity strategist at ANZ Bank.

"It looked like it was starting to recover, but I think there's a less certain outlook at the minute."

Speculation that China would need to import more fuel in the aftermath of the earthquake there is also supporting prices, analysts say.

Other factors thought to be spurring the oil price include the limited supply of refined products such as diesel ahead of the US driving season.

Amid the oil surge, top bosses from the five biggest international oil firms, including Exxon Mobil and Chevron, were forced to defend their massive profits before US Senate legislators, who accuse them of inflating prices at the petrol pump.