SINGAPORE Oil prices hovered below record highs on Wednesday, after the U.S. dollar rose on surprisingly robust U.S. economic data that moved supply concerns to the back of investors' minds for now.
U.S. light crude fell 28 cents to 113.51 a barrel by 2.40 British time, off Tuesday's record high of $114.08, but is still up nearly four-fifths from a year ago.
London Brent crude fell 38 cents to $111.20.
The weak dollar -- together with strong demand -- has driven oil and other commodities like corn, gold and rice to record highs in recent months, as investors and speculators have sought a hedge against inflation.
"The dominant factor continues to be the U.S. dollar and I expect this to continue for a while," said Gerard Rigby, an analyst at Sydney-based Fuel First Consulting.
"Whenever you get any kind of good economic news out of the (United States) at the moment, the dollar will rise and oil falls, and the other way round, you get a new oil record," Rigby added.
The dollar rose against the euro on Wednesday after robust U.S. inflation and manufacturing data suggested the U.S. Federal Reserve may be less aggressive in cutting interest rates.
Lifting some concerns over a supply squeeze, Mexico, a major supplier to the U.S., reopened its three main Gulf of Mexico oil ports as bad weather cleared, the government said.
Only a smaller Pacific port remained shut.
But in a sign that consuming countries were still concerned about a supply shortfall, Britain's prime minister Gordon Brown on Tuesday called on the Organization of the Petroleum Exporting Countries to boost production to counter rapidly rising prices.
OPEC, which pumps more than a third of the world's oil, said late on Tuesday it was supplying enough oil and the U.S. economic slowdown may weaken consumption in the second quarter, underscoring its reluctance to raise supply.
Demand in the world's top consumer may be losing steam. U.S. crude oil imports fell in February to the lowest level in a year.
They declined by 486,000 barrels per day, or 4.9 percent, from the month before to 9.514 million bpd, the federal Energy Information Administration said.
U.S. crude oil inventories likely rebounded last week, with an increase in imports lifting supply, following a surprise drawdown the week before, a Reuters poll of 14 analysts showed.
But gasoline stocks probably fell for the fifth week running.