NEW YORK — Crude prices spiked above $102 a barrel for the first time Wednesday, then retreated after the government reported the nation is greased with more oil and gasoline than expected.
Prices nonetheless stayed within range of Tuesday's record close as the dollar tumbled to fresh lows against the euro and U.S. economic worries drove more money into energy futures as a hedge against inflation.
"This is a market that has been trending strongly to the upside, ignoring fundamentals, and focusing on other factors," said Tim Evans, an energy analyst at Citigroup Global Markets. "They are not looking at how oil supply compares with oil demand."
Light, sweet crude for April delivery fell $1.24 to settle at $99.64 on the New York Mercantile Exchange, after surging as high as $102.08 a barrel in electronic trading earlier. On Tuesday, the contract jumped $1.65 to settle at a record $100.88 a barrel.
At the pump, gasoline prices added a penny overnight, rising to an average of $3.152 from $3.142, according to AAA and the Oil Price Information Service. At this time last year, drivers were paying an average of just $2.37 a gallon. Industry observers say prices will likely top last May's peak of $3.23 a gallon as stations begin to switch to more expensive summer-grade fuel.
The report by the Energy Department's Energy Information Administration showed U.S. crude oil inventories rose by 3.2 million barrels, or 1 percent, to 308.5 million barrels. Although that number is slightly lower than levels a year ago, it is well ahead of the 2.4 million barrel gain analysts had been expecting, according to a survey by Dow Jones Newswires.
It was the seventh straight week the report showed a rise in crude inventories, suggesting the U.S. at least has more than enough oil to meet demand. Data showed gasoline inventories also jumped more than expected _ by 2.3 million barrels to 232.6 million barrels; analysts had expected a more modest rise of 400,000 barrels. Refinery activity also increased much more than expected.
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill., said the report offered the market a number of bearish signals. But, he noted, traders of late have focused on other factors than just supply in deciding whether to buy or sell.
"We had somewhat of a tug-of-war going on all day long with an upward pull from the weak dollar and a downward pull from the statistics," he said. "As long as the dollar keeps making all-time lows against the euro, selling isn't going to be real aggressive."
The 15-nation euro jumped to a record $1.51 against the greenback, meaning that crude remains a relative bargain for buyers overseas. Gold _ another commodity seen as a hedge against inflation _ also struck a record high.
The negative economic news continued Wednesday when the Commerce Department reported that new factory orders for big-ticket manufactured goods tumbled 5.3 percent in January. The worse-than-expected drop was the indicator's biggest decline in five months.
On Capitol Hill, Federal Reserve Chairman Ben Bernanke warned of sluggish business growth ahead, and signaled a willingness by the central bank to cut interest rates again. But Bernanke also noted that the Fed must keep a close watch on inflation given the sharp rise in energy prices and other costs.
"You're looking at ... the use of the crude market as a hedge for inflation, while at the same time crude has been the source of inflation," Evans said. "As long as that feedback loop is in place, then prices could conceivably continue to push higher even though there's plenty of crude oil and plenty of gasoline."
Oil prices are still within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.
In London, Brent crude fell $1.20 cents to settle at $98.27 a barrel on the ICE Futures exchange, below the intraday record of $100.53 a barrel set earlier in the session.
In other Nymex trading Wednesday, heating oil futures fell 4.39 cents to settle at $2.7711, while gasoline futures fell by 7.28 cents to settle at $2.4777.
Natural gas futures lost more than 27 cents to settle at $8.93 per 1,000 cubic feet.