Oil roars to record over $112 on U.S. inventory drop

By Matthew Robinson

NEW YORK (Reuters) - Oil surged to a record high over $112 a barrel on Wednesday after a government report showed a sharp drop in U.S. inventories ahead of the summer driving season.

U.S. crude rose $3.03 to $111.53 a barrel by 1819 GMT (7:19 p.m. British time) after peaking at $112.21, and eclipsing the previous record of $111.80 hit March 17.

London Brent rose $2.69 to $109.03 a barrel after hitting an all-time high of $109.50 earlier.

U.S. crude stockpiles fell 3.2 million barrels last week as imports declined, countering analyst expectations for a build, while gasoline and distillate inventories also tumbled, the U.S. Energy Information Administration reported.

"It's bullish across the board. A very low crude import number got us a surprise draw there," said Tim Evans, analyst at Citigroup Futures Research. "Imports are basically running behind year-ago levels."

Concern about diesel supplies amid strong demand in Europe and Asia also supported crude this week, with London gas oil hitting an all-time high of $1,026.75 a tonne on Wednesday.

Further strength came from weakness in the dollar, which fell against the euro and the yen on views the U.S. Federal Reserve could cut interest rates by a 50 basis points this month amid worries of a possibly severe U.S. economic downturn.

The weak dollar has helped boost prices for commodities denominated in the greenback by boosting non-U.S. spending power and by luring investors seeking an inflation hedge.