Supply fears lifts oil over $100

Oil rose towards $101 a barrel this afternoon, trading within sight of its record high, as the US dollar sank to a new low and after a supply cut in Nigeria, Africa's top exporter.

Investors have pumped cash into commodities in recent weeks, betting on signs the US Federal Reserve will keep cutting rates to prop up the economy. The dollar fell to a record low versus the euro today.

"The energy complex is a dollar/inflation story as investors have moved into commodities as a hedge against inflation," said Nauman Barakat, senior vice president at Macquarie Futures USA.

"The ever-weakening dollar, upward inflationary pressures and geopolitical tensions are having a greater impact on the market than the fundamentals."

US crude rose $1.31 to $100.95 a barrel by 3pm, having hit a record high of $102.08 on Wednesday. London Brent crude gained $1.24 to $99.53.

Also boosting prices, output at Nigeria's Brass River crude oil stream was cut by 20,000 barrels per day this week due to sabotage on a pipeline, Italian oil firm Agip said. The leak was fixed yesterday.

The setback at Brass River comes on top of about 515,000 bpd of supply shut down in Nigeria. Earlier, oil traders said the Brass River output loss was between 50,000 bpd and 80,000 bpd.

Pressuring the dollar, US fourth quarter gross domestic product was revised lower and a surprisingly big jump in initial weekly jobless claims added to concern about the economy.

Expectations that the Organization of the Petroleum Exporting Countries will not raise production at its meeting on March 5 also supported oil's decline, as did winter fuel demand in the United States and Europe.