Crude oil blazes to record $94 while dollar reaches new low

London: Oil rallied to a record $94 a barrel yesterday after weekly data showed US crude inventories unexpectedly slumped by 3.9 million barrels, and the dollar hit a record low versus a basket of major currencies for the fourth trading day in a row, with investors poised for a US rate cut and possible hints of more cuts to come later in the day.

US oil futures rose $2.89 to $93.27 a barrel by 1616 GMT, off lows of $88.92, on top of a $4 slide in the previous session. London Brent gained $2.49 to $89.93.

Commercial stockpiles of crude oil in the United States fell by 3.9 million barrels to 312.7 million barrels in the week ended October 26, said the Energy Information Administration yesterday. Analysts had forecast a rise of 600,000 barrels in a Reuters poll.

"I am very surprised, the crude number is insanely bullish, it's a big drop, for the second week in a row," said Mike Wittner, global head of oil research at SocGen in London.

Oil prices may ease off over the next few days after investors who sold on Tuesday have covered their positions, said Tom James, head of commodities trading at Liquid Capital Markets in London. "It's a short-covering rally triggered by the fall in stocks," James said. "With any other news, I would expect the market should come back off again."

The euro rose against the dollar to a fresh lifetime high at $1.4472, according to Reuters data. The dollar index, which tracks the US currency's performance against a basket of six major currencies, fell to 76.605, the lowest in the index's more than 30-year history. "Even if they cut 25 basis points and even if they don't promise too much more, that's not really going to change the underlying trend [of a weaker dollar]," said Chris Turner, head of FX strategy at ING.

He added that the dollar could also be weighed down by central banks of oil exporters such as Russia re-balancing their foreign exchange reserves at the end of a month which saw oil prices scale record highs at $93.80 a barrel.

Sterling struck a 26-year high against the dollar at $2.0743, boosted by above-forecast UK house price inflation data from Nationwide which made investors question the need for a near-term rate cut from the Bank of England.

The European currency got a brief boost from data showing euro zone inflation beating all expectations with a jump to an annual 2.6 per cent in October.