Oil rose Wednesday after production shutdowns, falling U.S. inventories and growing demand sent Brent crude toward $100 a barrel for the first time since 2008.
U.S. government data showing U.S. crude stocks falling for a sixth straight week helped extend this week's gains. Disruptions from Alaska and Norway stoked supply concerns and cold weather in the U.S. Northeast fed demand for heating oil.
Oil's climb back toward $100 a barrel — last touched in October 2008 — has raised concerns about the impact of higher fuel costs on the tenuous economic recovery.
"Back in 2008, (U.S.) crude oil only traded above $100 a barrel for about six months before the world economy collapsed into the worst crisis since the 1930s," warned Sabine Schels, commodity strategist for Merrill Lynch.
Crude's rise on Wednesday was part of wider gains across commodities, with metals rising and soybean and corn futures touching 30-month highs that further stocked economic worries.
London Brent oil, benchmark for European, Middle East, and African crudes, rose 51 cents to settle at $98.12 a barrel, after touching $98.85 a barrel earlier, the highest level since Oct. 1, 2008.
Brent held its strong premium to U.S. crude, which settled up 75 cents at a 27-month high of $91.86 a barrel.
The premium widened this week after disruption of two North Sea oil fields and the shutdown of the Alaskan crude pipeline, which had raised concern Pacific Basin refiners would have to find alternatives from Russia and the Middle East.
Supply concerns eased after the operator of the Trans Alaska Pipeline System said throughput on the line had reached 400,000 barrels per day (bpd), about two-thirds of normal throughput, as part of a provisional restart plan after it was shut by a leak on Saturday.
In addition, two Norwegian offshore oil fields restarted production after a disruption boosted Brant earlier in the week.
Further support for Brent's premium to U.S. crude has come from high inventory levels at the Cushing, Oklahoma delivery point for the U.S. oil futures contract.
U.S. INVENTORY FALLS
Overall U.S. crude stocks, especially along the Gulf Coast, have been on the decline.
Data from the U.S. Energy Information Administration released on Wednesday showing oil inventories fell for the sixth straight week, slashing supplies by nearly 27 million barrels, the biggest six-week decline since January 2008.
Gasoline and distillate stockpiles rose, while heating oil inventories fell as cold weather boosted demand in the giant U.S. Northeast market and pushed heating oil futures to 27-month highs.
Crude oil prices rose as the dollar fell 1.0 percent against a basket of currencies, supporting lifting dollar-priced commodities.
The dollar's decline came as the euro rallied on rising risk appetite after a healthy debt auction in Portugal, somewhat easing euro-zone fiscal worries.
U.S. stocks also rose after the auction, and agricultural stocks rallied after a U.S. government report that stockpiles of corn and soybeans would be drawn down to surprisingly low levels.
The news boosted food prices, adding to the worries about the impact of higher commodities prices on consumers.
"It's a little disconcerting and while I don't think it will immediately slow the world economy it will have an effect on consumers," independent investor Dennis Gartman said of oil's rush to $100 a barrel.
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