Crude oil rose above $126 a barrel last week as the dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency's decline. For a fifth day oil climbed to all-time highs as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation.

The Organization of Petroleum Exporting Countries, the producer of more than 40% of the world's oil, may meet before September to consider increasing output in an attempt to rein in record crude-oil prices, Libya's Shokri Ghanem said. Nigerian Petroleum Minister of State H. Odein Ajumogobia said today that there are no plans for an additional OPEC meeting because oil supplies are adequate. OPEC kept its production target unchanged at its past three meetings. The group last increased its target on Nov. 1.

Crude oil for June delivery rose to $125.96 a barrel. The contract surged to $126.27 Friday, the highest since futures began trading in 1983. Prices are up 8.3% last week, the biggest weekly gain in more than a year. Futures have more than doubled in the past year. Brent crude oil for June settlement climbed to $125.40 a barrel. The contract touched $125.90 Friday, the highest since trading began in 1988.
Gold rose last week, capping the biggest weekly gain since February, on speculation a weaker dollar and rising energy costs will boost investor demand for the metal as a hedge against inflation. Gold futures for June delivery gained to $885.80 an ounce. The metal rose 3.2% last week, the biggest gain late February. Silver futures rose to $16.91 an ounce. The price has advanced 13% this year.

Copper fell on rising stocks, falling demand from Asia and as equity market weakness re-ignited fears of lower demand ahead. The London Metal exchange reported, in a daily note, that copper stocks across the world rose over 11,000 tonnes. Copper closed at $8,189 per tonne. Meanwhile, a firmer dollar has also pressured metals, with commodities priced in the U.S. currency becoming less attractive as a hedge against rising inflation and the greenback's recent slump.

The dollar fell broadly on Friday as sagging stock markets and a jump in oil prices to a record high weighed on the U.S. currency, while fading risk demand boosted the low-yielding yen. Rate pared its loss versus the euro Friday after a Commerce Department report showed the U.S. trade deficit narrowed more than forecast in March as imports dropped by the most in more than six years. The euro rose against the dollar today on speculation the ECB will keep its benchmark rate at a six-year high of 4% in coming months to curb price pressures. Futures on the Chicago Board of Trade show a 78% chance the Fed will hold its target lending rate at 2% at its next meeting on June 25, down from an 82% chance yesterday. The balance of bets is for a cut of a quarter- percentage point.

The euro added to gains after ECB President Jean-Claude Trichet said on Thursday that inflation remained his top concern, suggesting the bank may not cut interest rates soon. Inflation in Europe will stay high ``for a rather protracted period,'' Trichet said at a press conference yesterday following the ECB's decision to keep its main refinancing rate at 4 percent.

The euro recovered after falling to a two-month trough below $1.53 as some investors expected Trichet to temper his tough talk on inflation and focus on signs of slowing euro zone growth.

Sterling fell tor a third week against the dollar on speculation the Bank of England will add to three interest- rate cuts since December. Rate fell to a two-month low after the Bank of England kept interest rates on hold at 5% on Thursday.

The yen rose against the euro as concern credit- market losses are spreading hurt stocks and spurred investors to sell higher-yielding assets funded in Japanese currency. The yen was rose versus the dollar after American International Group Inc. said it needs $12.5 billion to offset subprime-related writedowns following two straight quarterly losses. Japan's currency has gained 2% against the euro and 2.2% against the dollar last week. The euro has increased 6 percent against the dollar this year and 0.1% for the week. It has dropped 3.3% against the U.S. currency since reaching a record high of $1.6019 on April 22.

U.S. stocks fell, sending the market to its first weekly drop in a month, on concern that record crude oil prices will reduce profits at refiners and lower copper and gold prices will hurt mining companies.The Standard & Poor's 500 Index sank 7.38, or 0.5 percent, to 1,390.3 at 11:08 a.m. in New York, giving it a 1.7 percent decline this week. The Dow Jones Industrial Average slid 88.66, or 0.7 percent, to 12,778.12, led by a 7 percent drop in American International Group Inc. The Nasdaq Composite Index lost 2.15, or 0.1 percent, to 2,449.09. More than four stocks fell for every three that rose on the New York Stock Exchange.Energy companies in the S&P 500 contributed the most to the retreat even as crude surged to a record above $126 a barrel. Producers of raw materials retreated 1.9 percent as a group, led by Freeport-McMoRan Copper & Gold Inc. and Nucor Corp.

Valero Energy Corp., the biggest U.S. refiner, tumbled to an almost three-year low after Goldman Sachs Group Inc. said it may face reductions in profit estimates. Dril-Quip Inc., which makes equipment for offshore oil and gas production, retreated after profit missed estimates by 10 percent. Financial shares pared earlier declines, led by Citigroup Inc. after the largest U.S. bank said it plans to sell $400 billion in assets.
Mylan Inc. fell 9.8 percent to $11.23. The largest U.S. maker of generic medicines reported a wider first-quarter loss on costs tied to the $6.9 billion purchase of Merck KGaA's generics division in October.
McDonald's Corp. fell 42 cents to $59.35. Goldman Sachs Group Inc. removed the world's largest restaurant company from its ``conviction buy list'' and added Burger King Holdings Inc. McDonald's had risen 16 percent since being added to the list June 12, and additional gains may be ``muted'' in the coming months, Goldman analysts led by Steven T. Kron wrote in a report. Burger King may benefit from price increases and extended summer hours, Goldman said.
Financial shares dropped 0.2 percent, paring a decline of as much as 1.3 percent. Citigroup added 14 cents to $24.44 on plans to ``wind down'' about $400 billion of assets as part of a program to return to profitability. The bank announced the wind- down today in a presentation posted on the company's Web site. The New York-based company, which lost $5.1 billion in the first quarter, has recorded more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year.

The spike in oil prices took its toll on sentiment and knocked the wind out of the market's sails. Its effect was punctuated at the end of the week when FedEx (FDX) issued an earnings warning late Friday that was pinned on rising fuel costs.

By the same token, the financial sector also had a heavy hand in the action, falling 6.3% for the week following a batch of ugly earnings reports from the likes of Fannie Mae (FNM), UBS (UBS) and Dow component American International Group (AIG).