NEW YORK Crude prices spiked above $102 a barrel for the first time Wednesday but retreated after the government said stockpiles of crude oil and gasoline rose far more than expected last week.
Prices nonetheless remained 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.
Light, sweet crude for April delivery fell 12 cents to $100.76 on the New York Mercantile Exchange, after surging as high as $102.08 a barrel in electronic trading earlier. The contract on Tuesday jumped $1.65 to settle at $100.88 a barrel, a record.
"It's not about the gas inventories, it's not about the seasonality," Evans added. "Traders are buying and selling on other theories of valuation. They are not looking at how oil supply compares with oil demand."
Meanwhile, gasoline prices at the pump jumped a penny overnight, rising to an average of $3.152 from $3.142, according to AAA and the Oil Price Information Service. A year ago, drivers were paying an average of just $2.37 for a gallon of gas.
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 ought to send a bearish signal to the market. But, he added, traders have found other reasons to push prices up in the face of previous bearish reports.
"The initial response to the downside from this report could be easily reversed by day's end," he said.
Traders seemed to focus largely on the slumping dollar, which is increasingly driving investors to oil and other commodities to protect against inflation. The 15-nation euro jumped a record $1.51 against the greenback, ensuring that crude will remain a relative bargain for buyers overseas.
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 48 cents to $98.99 a barrel on the ICE Futures exchange, below the intraday record of $100.30 a barrel set earlier in the session.
In other Nymex trading Wednesday, heating oil futures fell 1.5 cents to trade at $2.7997, while gasoline futures fell by 4.7 cents to $2.5035.
Natural gas futures lost more 17 cents, fetching $9.035 per 1,000 cubic feet.