Oil ends over $50 a barrel

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NEW YORK (CNNMoney.com) -- Oil prices jumped Thursday, closing above the $50 threshold for the first time since late November, as the dollar weakened significantly after the government announced it would spend another $1 trillion.

Crude for April delivery settled up $3.47 a barrel, or 7.2%, to $51.61. Earlier in the session, oil climbed as high as $52.25 a barrel in electronic trading. The last time oil closed above $50 a barrel was Nov. 28, nearly 4 months ago, when oil settled at $54.43.

Friday is the last day of trading on April contracts, according to the New York Mercantile Exchange Web site. Starting Monday, the May contract becomes the so-called "front-month" contract (see correction).

"Obviously we have an extremely weak dollar today and that is the main catalyst for all commodities going up today," said James Cordier, founder of OptionSellers.com. The sinking dollar "is the lion share of oil's rally today for sure," added Cordier.

The Federal Reserve announced Wednesday that it would buy $300 billion of long-term Treasurys over the next six months in an effort to get the pipelines of credit moving more freely. In addition, the government will buy an additional $750 billion in mortgage-backed securities in an effort to lower mortgage rates.

The government's commitment to spend another $1 trillion, put pressure on the greenback. When the government adds to the money supply, that raises fears of inflation. Crude oil is bought and sold in dollars around the globe, and therefore, when the greenback loses value, the price of oil increases.

The weaker dollar pushed the price of oil up Thursday, even as the global recession has cut sharply into global demand.

"Slowing demand and rising supply might not matter as the Fed prints trillions of dollars to buy back treasury securities and create an artificially lower yield driving down the value of the dollar and driving up the priced in cheaper dollar oil," said Phil Flynn, senior market analyst at Alaron Trading, in a research note.

Wednesday, the Energy Information Administration said stockpiles of gasoline increased significantly, where analysts were expecting a decline in stockpiles. Supplies of crude also increased in the most recent week.

In the face of falling demand and rising supplies, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - have pledged to limit production quantities. "OPEC has cut back about as much production as is possible at this time," said Flynn.

Going forward, whether oil prices sustain Thursday's rally depends on the economy and the dollar. "What we are going to do now is key off of global stock markets," said Cordier. If stock markets show optimism, that would be a signal to the oil market that the economy could be healing, and with it, demand for oil.

"If stock markets hold these gains through the weekend and into Monday, then crude oil has another leg up," said Cordier. "The stock markets are the best barometer to show economic growth in the future," he added.

The movement of the dollar in coming trading sessions will also have an impact on oil. If the dollar gains strength early next week as investors refocus on economic weakness in the euro zone, that would again weigh on oil prices, according to Cordier.

Meanwhile, retail gasoline prices ticked higher. The national average price for a gallon of regular unleaded gasoline increased to $1.93, up 1.3 cents from the previous day's price of $1.920, according to motorist group AAA's Web site.

Correction: An earlier version of this story incorrectly stated that Thursday was the last day of trading for the April contract. Friday is the last day of trading for the April contract. CNNMoney.com regrets the mistake. (Back to story)