Oil sets record high

By Alex Lawler

LONDON (Reuters) - Oil set a record above $115 a barrel on Thursday as a drop in U.S. gasoline inventories raised concern of tighter supply and a weak dollar boosted investor demand for commodities.

A U.S. government report on Wednesday showed a surprise drop in crude inventories and a larger-than-expected decline in stocks of gasoline. Demand for the motor fuel usually peaks in the summer.

"The helpful thing for the market is the further erosion in product stocks," said Christopher Bellew, senior vice president at Bache Commodities. "Technically, the market still looks bullish."

U.S. crude set a record of $115.54 a barrel and by 11:51 a.m. was trading at $114.92, down 1 cent. Oil has hit new peaks for three consecutive days. London Brent set a record of $113.38.

Gasoline stocks in the United States fell by 5.5 million barrels in the latest week, the U.S. Energy Information Administration said, more than the 1.8 million-barrel decline analysts expected.

"Summer driving season is approaching. And even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain," said Jan Stuart at UBS.

"But before we get there, the stress already put onto the supply chain globally by middle distillate demand and supply dynamics is not still abating," he said in a research note.

London's gas oil, the benchmark for heating oil and diesel in Europe, set the pace for crude oil and refined product futures, gaining 0.7 percent to $1,052.00 a tonne.