US crude stood 15 cents higher at $ 101.03 a barrel by 1300GMT, off its new record high of $ 102.08 and its 1980 inflation-adjusted peak of $ 102.53.
London Brent crude climbed 16 cents to $ 99.63 a barrel, after earlier hitting a record of $ 100.30.
The dollar slumped to an all-time low against the euro as well as a basket of major currencies after data from the United States highlighted a gloomy outlook for the US economy, raising the spectre of more rate cuts.
A weak dollar can trigger commodities buying as investors seek to preserve their nominal value in other currencies.
The price of oil has risen nearly 66 per cent in the past year in US dollar terms, whereas in terms of euros, the rise has only been around 47 per cent.
Analysts and investors also said that the US was seeing a sharp increase in inflation, after data showed that producer prices rose one per cent in January and by 7.4 per cent on an annual basis, the biggest 12-month gain in more than 26 years.
“In this climate, therefore, people tend to buy real assets like oil and gold,” said Colin Morton, investment director at Rensburg Fund Managers.
Stagflation: Edward Meir at MF Global added the economic backdrop in the US now was similar to the stagflation of the late 1970’s, which saw rising inflation and low growth.
“In this type of environment, commodities do quite well, since participants turn to hard assets to protect themselves against eroding purchasing power,” he said.
Barclays Capital raised its average oil price forecast for 2008 to $ 97.7 a barrel from $ 87.4 previously. Oil has averaged around $ 93.66 so far this year, up from $ 72.30 in 2007.
Most commodities markets pushed higher yesterday with gold hitting a new record high, and copper, aluminium and silver also hovering near multi-year peaks, underscoring their attraction to investors as a hedge against the dollar and an alternative to other financial markets.
Oil has also lately been supported by growing winter fuel demand in the United States and Europe amid falling temperatures, and indications from Opec that the exporter group will not increase production at its meeting next week.
“I think Opec will probably leave things as they are,” said Tom Nelson, analyst at Guinness Atkinson Funds.
On Tuesday, Opec’s president said members would agree not to raise production, in part because of fears of a demand slowdown.
In the United States, crude oil supplies are forecast to have risen last week by 2.5 million barrels, the seventh increase in a row, as refineries undergoing maintenance have built up stocks.
A Reuters poll of industry analysts predicted US distillates stocks, including heating oil and diesel, would maintain their seasonal decline, down 2.1 million barrels, due to cold temperatures and a dip in production and imports.
