Oil prices pushed higher on Friday, on pace to post their eighth consecutive monthly rise, as the weaker dollar and turmoil in North Africa and the Middle East offset concerns about fuel demand and slowing U.S. economic growth.
Both Brent and U.S. crude were poised for an eighth straight month of gains, marking the longest run of monthly increases for U.S. futures since the contract was introduced by the New York Mercantile Exchange in 1983, according to Reuters data.
Expectation's the U.S. Federal Reserve will maintain a loose monetary policy following this week's meeting has helped to fuel oil's rise, weakening the dollar and pushing investors into riskier assets such as commodities.
Refinery problems ahead of the U.S. summer driving season have added further support to U.S. gasoline futures, which are now just 5 per cent below all time record highs.
Brent crude for June rose 83 cents to $125.85 (U.S.) a barrel by 2:26 p.m. ET. Brent's 2011 peak of $127.02 was reached on April 11.
U.S. crude for June settled up $1.07 at $113.93 a barrel after touching $114.18 earlier, the highest intraday price since prices reached $130 on Sept. 22, 2008. U.S. crude rose 6.8 per cent for April.
Both U.S and Brent crude bounced from early dips after euro zone data showed the inflation rate rose further above the European Central Bank's target in April, helping push the dollar index against a basket of major currencies to a three-year low.
Thursday's report that growth in the U.S. gross domestic product slowed more than expected in the first quarter reinforced the perception that the U.S. central bank will continue with its loose monetary policy.
"Yesterday's three-year lows in the dollar index following the mid-week Fed statement strongly suggests a market dynamic that is not yet ready to reverse," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
"Consequently, oil will continue to be valued as an asset class or inflation hedge along with other commodities such as the gold market."
Crude oil trading volumes remained tepid, dampened by a holiday in the United Kingdom.
Volatility and uncertainty due to the pan-Arab protests and Libya's conflict have tempered trading. The U.S. 30-day average volume is down by nearly 130,000 lots compared with the 250-day average, according to Reuters data.
AFRICA, MIDEAST TURMOIL
Libya's conflict spilled beyond its borders as forces loyal to leader Muammar Gaddafi attacked the Tunisian town of Dehiba, near the Libyan border..
Morocco, which borders oil and gas producer and OPEC-member Algeria, said a bomb that killed at least 14 people on Thursday was a terrorist act.
In the Middle East, tensions escalated in Syria and tens of thousands rallied across the country demanding political freedoms.
EYEING HIGH PRICE
Oil's price rise could be tempered if evidence that high prices are eroding demand starts to confirm forecasters' fears that they are slowing consumption and the global economy.
U.S. consumer spending rose as households stretched to cover the higher cost for food and gasoline as inflation posted its biggest year-on-year rise in 10 months.
Separate reports showed U.S. Midwest factory activity and that while U.S. consumer sentiment rose as a sharp increase in gasoline prices was viewed as being temporary, consumers still anticipated additional price increases.
Complaints about high prices were the most frequent since 2008 and half of all households said their finances had worsened, according to the survey.