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New York: Oil hits a record high near $106 on Thursday, fueled by the weak dollar and OPEC's decision to hold crude output steady.
US oil settled up 95 cents at $105.47 a barrel after hitting a record $105.97 a barrel during the session. London Brent crude rose 97 cents to settle at $102.61 a barrel, after hitting a record $102.95.
The gains followed a $5 jump on Wednesday, after declining US crude inventories and a decision by the Organisation of the Petroleum Exporting Countries to maintain production levels despite consumer-nation calls for more oil.
Speculative buying as investors seek a hedge against inflation and a tumbling dollar also drove oil prices higher.
"The dollar is going down again and hedgers are buying commodities and this is all adding fuel to the fire," said Mark Waggoner, president of Excel Futures.
The dollar extended losses against the euro and the yen on Thursday after US pending home sales were reported unchanged in January, doing little to allay investor worries over the deteriorating US economic outlook.
Wednesday's surge marked oil's single biggest price gain in absolute dollar terms, according to Reuters database EcoWin, although there have been larger daily percentage price gains. "The crude squeeze continues.
The sharp rise in crude was exacerbated by a weak US dollar, OPEC's decision to stand still," Citigroup said in a research note.
OPEC agreed to hold production at current levels on Wednesday, despite calls from the US to increase output to help consumers already battered by the mortgage crisis and the credit crunch.
A US government report Wednesday showed crude stocks in the world's largest consumer fell by 3.1 million barrels last week, against analysts' forecasts for an increase.
Distillate inventories, including heating oil, fell 4.8 million barrels, dropping for the fourth consecutive week, as colder weather hit the U.S. Northeast. Gasoline stocks rose for the 17th straight week.
OPEC will next meet in September to assess production levels and evaluate the market, although ministers could confer informally at a conference between consumers and producers in Rome on April 20-22.
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