(Xinhua)
Updated: 2008-03-06 10:52

NEW YORK -- Oil prices topped 104 dollars a barrel Wednesday for the first time ever after a US government report said supplies of crude fell significantly last week, instead of rising as expected.

US light crude for April delivery rallied to 104.64 dollars on the New York Mercantile Exchange in afternoon trading, beating the previous all-time intraday high of 103.95 dollars set Monday and breaking the previous inflation-adjusted price record of 103.76 dollars, set in 1980 during the Iran hostage crisis.

The front-month contract jumped 5 dollars to settle at a record US$104.52 a barrel on the NYME.

Related readings:  OPEC keeps oil output steady  Oil surpasses $103 for first time  Crude oil rises past $102 mark  OPEC rejects call for higher output

Most analysts had expected the Energy Department's Energy Information Administration to report oil supplies rise last week for the eighth straight time. Instead, crude-oil supplies fell 3.06 million barrels to 305.4 million in the week ended Feb. 29, according to the Energy Department.

A 2.4-million-barrel gain was forecast, according to the median of responses by 15 analysts surveyed by Bloomberg News before the report's release.

Analysts said the surprise decline in crude inventories would no doubt give the bulls an impetus to take prices higher.

Overnight, OPEC, the 13-nation cartel that controls about 40 percent of the world's oil production, decided to leave the output quotas unchanged, as had been widely expected by the market.

OPEC members meeting in Vienna insisted that oil markets are well supplied and blamed record prices on factors outside the cartel's control, including speculators and the "mismanagement" of the US economy.

Speculators have reportedly piled into oil and other commodities as a hedge against the weaker dollar and inflation as the US economy slows due to the credit crunch, the mortgage crisis and high energy costs.

Many suggested that oil's sharp jump Wednesday was also partly driven by the dollar, which fell to a new low against the euro, increasing the appeal of commodities as an alternative investment.

The dollar touched 1.5303 dollars per euro, the weakest since the euro's start in 1999, from 1.5217 dollars Tuesday.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

Further support for oil prices came from escalating tensions in South America. OPEC member Venezuela reportedly deployed tanks and its air and sea forces toward the Colombian border in its first major military mobilization in a crisis with Colombia.