Oil hits record over $140 as Libya mulls cuts

NEW YORK: Oil prices surged to a record over $140 a barrel on Thursday after Libya said it was studying options to cut output in response to possible US actions against producer countries.

US crude rose $5.50 to $140.05 a barrel by 2:22 p.m. EDT, passing the record of $139.89 a barrel struck on June 16. London Brent crude traded up $5.33 to $139.66 a barrel.

"The crude oil market spiked sharply higher in early trading after Libyan National Oil Company chief Shokri Ghanem said that Libya was considering a production cut," said Tim Evans of Citi Futures Perspective.

Ghanem, Libya's most senior oil official, said he was studying the possibility of reducing production in response to a bill before the U.S. Congress that would empower the Justice Department to sue members of the Organization of Petroleum Exporting Countries for limiting oil supplies.

"We are studying all the options," Ghanem told Reuters. "There are threats from the Congress and they are taking OPEC to court, extending the jurisdiction of the U.S. outside the U.S."

President George W. Bush has said he would veto the legislation if it were passed by Congress. The House of Representatives passed the bill in May, but the Senate has yet to schedule a vote on the measure.

Oil prices have rallied over the past six-years, supported by surging demand from emerging economies like China and India.

Rising flows of cash into commodities from investors seeking to hedge against inflation and the weak dollar have added to gains this year.