Oil closed above $113 a barrel on Tuesday, after setting record highs near $114, as investors sought to hedge against a battered dollar.
Britain's Prime Minister Gordon Brown called on oil producers to take action to dampen prices ahead of talks with U.S. President George W. Bush where Brown said they would discuss collective action to bring prices down.
U.S. light, sweet crude gained $2.03 per barrel Tuesday, or 1.8%, to settle at $113.79 on the Nymex -- but off its intraday record high of $113.93.
Oil is up about 18 percent from the start of the year and is averaging near $100.
London Brent crude was up $1.91 at $111.75, after a record high of $111.85.
The May Brent futures contract expires later on Tuesday.
"One thing that is clearly driving the oil price is that the U.S. dollar has gotten substantially weaker in the past several months and quarter," said Richard Batty of Standard Life.
"The volatility in asset markets -- mainly equities -- has pushed investors towards commodities." The dollar recouped some of its losses versus the euro after U.S.
Treasury data showed foreigners increased purchases of U.S. assets in February.
The data eased some concerns that capital inflows into the U.S. could dry up because of the credit crisis.
A weak dollar tends to raise prices for commodities denominated in that currency by boosting non-U.S. spending power and by attracting investors seeking an inflation hedge.
Dealers said oil's climb to new record highs has sparked a fresh wave of buying.
Tetsu Emori, fund manager at Astmax Co Ltd said prices had risen due to automatically placed buying orders once the previous record had been breached.
He sees the next resistance target at $115.
British Prime Minister Gordon Brown urged oil producing countries to act to counter high prices.
"The market needs to be adequately supplied and oil-producing countries have their responsibility to respond to higher oil prices," Brown will say, according to excerpts from a speech he is due to give later on Tuesday.
Brown, who is due to travel to Washington on Wednesday for talks with U.S. President George W. Bush, said he planned to discuss collective action to bring down oil prices.
OPEC, which pumps more than a third of the world's oil, says it is producing enough and that a U.S. economic slowdown may weaken consumption in the second quarter.
"Current OPEC production at more than 32 million barrels per day will be sufficient to both meet demand growth and contribute to further stockbuilds," the Organization of the Petroleum Exporting Countries said in its latest Monthly Oil Market Report.
OPEC has pointed to U.S. dollar weakness, speculative inflows and political tensions as key factors driving prices rather than a lack of oil.
U.S. gasoline futures hitting fresh highs on Monday also helped prices.
They rose as the United States gears up for the summer driving season, when demand traditionally peaks.
U.S. crude oil inventory figures are due on Wednesday.
They likely rebounded last week after a surprise drawdown the week before, with an increase in imports lifting supply, according to a preliminary Reuters poll of eight industry analysts.