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NEW YORK - Oil surged to a record on Tuesday as weakness in the US dollar, following a batch of gloomy economic data, spurred a broad-based rally across the commodities markets.
Strong heating fuel demand in Europe and the United States in the midst of a cold spell
and signals from Opec that the group will not raise production at its meeting next week added support to crude's gains, dealers said.
US crude gained $2.20 to a record $101.43 a barrel - close to the inflation-adjusted peak of $102.53 hit in 1980. London Brent crude rose $2.34 to $100.03 a barrel.rst level in five years while inflation soared among producers, sparking fears of stagflation.
While a weak dollar can sometimes trigger commodities buying as dealers seek to preserve nominal value in other currencies, worries about an economic slowdown have tempered oil's rally in recent weeks by dimming the outlook for global energy demand.
WINTER CHILL
Oil's gains added to a 42-cent rise on Monday that was led by heating fuels as cold weather hit parts of Europe and seasonal temperatures lingered over the northern US states following a mild start to winter.
"We have had some cold weather influence since Friday, which seems to have caught people's imagination," said Tony Machacek of Bache Commodities.
Energy traders also have been cautiously eyeing signals from the Organisation of the Petroleum Exporting Countries ahead of the group's meeting March 5. Opec's president said on Tuesday members would agree not to raise production, in part because of fears of a demand slowdown.
"I can tell you they are not going to increase production because there are plenty of stocks," Opec President Chakib Khelil told Reuters in Nigeria's capital Abuja.
Some oil market analysts believe a seasonal drop in demand could even lead Opec to curb oil shipments unofficially.
"The recovery in (crude oil) stocks, the downward revisions to demand and an upcoming seasonal drop in world demand for the second quarter have not escaped Opec's detection," Tim Evans, an analyst at Citi, said in a research note.
In the United States, crude oil supplies are forecast to have risen last week by 2.5 million barrels, the seventh increase in a row, as refineries undergoing maintenance have built up stocks.
A preliminary Reuters poll of industry analysts predicted US distillates stocks, including heating oil and diesel, were expected to maintain their seasonal decline due to cold temperatures and a dip in production and imports.
The US government data is due on Wednesday. (Additional reporting by Jane Merriman in London; Editing by Marguerita Choy)
- REUTERS