Oil hovers below highs as dollar gains on data

SINGAPORE (Reuters) - 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.