NEW YORK (CNN/Money) -
Oil prices neared record highs Wednesday, but settled up only slightly as traders took profits as the session wound down.
Trade was volatile all day before the contract settled at $54.77, 40 cents below the settlement high. Although prices retreated toward the end of the day, they remain more than 50 percent higher than a year ago. May and June delivery crude touched contract highs above that level Tuesday.
Despite a bearish government report that crude supplies had risen more than expected, U.S. light crude for April delivery touched an intraday high at $55.65 on the New York Mercantile Exchange, 2 cents short of the record set on October 25, 2004.
Earlier reports that the contract had touched a new high were based on confusion on the NYMEX trading floor.
Britain's Brent crude for April delivery settled up 91 cents at $53.75. According to Reuters, the contract set a new intraday high at $53.95 during regular trading.
Traders seemed to shrug off evidence of rising oil supplies and news that stocks of distillate fuel used for heating had fallen by less than anticipated, focusing instead on strong demand, cold weather and global unrest.
Nauman Barakat, of Refco trading in New York, said traders used the morning report as an opportunity to buy oil again.
"Any selloff in the market is being used by the funds to reload on the long side," said Barakat, adding that strong market fundamentals, such as robust demand in China and lower output from non-OPEC producers, also supported higher prices.
"The Exxon Mobil chairman just said at a conference today that oil prices are basically reflecting the global political climate more than supply and demand fundamentals," said Fadel Gheit, an oil analyst at Oppenheimer.
Some analysts say the recent run up has been speculative in nature, they see no reason for prices to fall so long as the economy continues to grow.
"There is no reason for the prices to fall when people are obsessed with the possibility of supply disruptions and the fact that prices are not slowing demand," Gheit added.
And while crude prices neared record highs today, analysts said it is important to remember that current oil prices, adjusted for inflation, are significantly below what they were 25 years ago. Prices would have to top $90 per barrel to meet the inflation-adjusted peak set in 1980.
Earlier, oil flip-flopped after the Energy Information Administration said crude stocks rose by 3.2 million barrels in the week ended March 4. Analysts had expected a rise of 1.8 million barrels.
Stocks of distillate fuels, which include heating oil, fell by 800,000 barrels. Analysts polled by Reuters had expected a drop if 1.3 million barrels.
A cold snap in the Northeast and talk from OPEC about not increasing production pushed oil prices solidly higher Wednesday morning, as did a falling dollar.
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