Oil prices jump after dollar slides

NEW YORK -- Oil prices soared more than $4 a barrel Wednesday as two big market drivers -- lower than expected fuel inventories and another slide in the dollar -- had traders buying in force for the first time in a week.

Prices rose across the energy spectrum, marking a reversal in sentiment from last week when falling demand for oil, gasoline and other fuels and a strengthening dollar pulled oil down nearly 10 percent from a record near $112.

The Energy Department's Energy Information Administration said Wednesday gasoline and distillate supplies, which include heating oil and diesel fuel, dropped much more than forecast last week, while crude oil inventories were unchanged. Analysts surveyed by Dow Jones Newswires had expected crude supplies to rise by 1.7 million barrels.

Investors were already buying oil before the release of the report; the falling dollar, which was hurt Wednesday by disappointing economic data, again raised oil's appeal as a hedge against inflation.

Light, sweet crude for May delivery rose $4.68 to settle at $105.90 a barrel on the New York Mercantile Exchange.

"The bullish inventory report on top of the concerns about the dollar is just exacerbating the move that we already had," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

The inventory report stoked worries that supplies of gasoline in particular are falling at a time when analysts would like to see them rising in advance of peak summer driving season. Gasoline inventories slid by 3.3 million barrels last week, more than four times the decline analysts had expected.

In part, that's because refinery activity dropped. Analysts said some refiners are cutting gasoline production due to low profit margins.