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Oil Closes Below $100 After Hitting Intraday Record

Oil slipped more than $1 Wednesday as rising inventories in top consumer the United States clipped a record rally past $102 a barrel.

Oil Pipeline
Oil Pipeline

Investors have pumped cash into commodities in recent weeks, seeking a hedge against inflation and betting on signs the U.S. Federal Reserve will keep cutting rates to prop up the shaky U.S. economy.

U.S. crude settled down $1.24 at $99.64 a barrel.

Earlier, it hit an all-time high of $102.08 a barrel, near the inflation-adjusted peak of $102.53.

London Brent traded down $1.15 to $98.32 in late trading, off a record high of $100.53 touched earlier in the session.

A U.S. government report showing substantial builds in crude oil and gasoline stocks weighed on crude's early gains, while weak demand stoked concerns about the economy in the United States, the world's top oil consumer.

Crude oil stocks rose by 3.2 million barrels last week, above analyst forecasts for a 2.5 million-barrel build, while gasoline stocks hit their highest level in 14 years.

"This report should be enough to weigh down the market, but there is a lot of speculative money pouring into this market. Participants in this market are obviously focusing on more than just fundamentals,'' said Mike Fitzpatrick at MF Global.

Oil rallied early Wednesday as the dollar plumbed an all-time low against the euro as well as a basket of major currenciesafter U.S. data highlighted a gloomy outlook for the U.S. economy and raised the possibility of more rate cuts.

Investors have plowed money into commodities as a hedge against inflation and the weakening dollar. The price of oil has risen nearly 66 percent in the past year in U.S. dollar terms, but only around 47 percent in euros.

Federal Reserve Chairman Ben Bernanke Wednesday signaled the U.S. central bank was ready to cut interest rates again, raising concerns over further inflation, which jumped 1 percent in January and 7.4 percent on an annual basis.

"In this climate, therefore, people tend to buy real assets like oil and gold,'' said Colin Morton, investment director at Rensburg Fund Managers.

Commodities markets pushed higher Wednesday, with gold hitting a record high. Copper, aluminium and silver also hovered near multiyear peaks.

Support also has come from growing winter fuel demand in the United States and Europe, and from expectations that OPEC will not increase production at its meeting next week.

OPEC's president said Tuesday members would not raise output, in part because of fears of a demand slowdown.

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