NEW YORK (CNNMoney.com) -- Oil prices jumped over $1 Thursday, setting a new record high as the dollar continued to reel in the wake of a half-point interest rate cut by the Federal Reserve.
U.S. crude for October delivery rose $1.39 to settle at $83.32 a barrel on the New York mercantile exchange. Crude also hit a new intraday high of $83.90 a barrel.
Trading was exceptionally volatile and light Thursday as the October contract for crude expired, which helped add to the gains.
The dollar plummeted to a new low against the euro Thursday and hit a 1-to-1 parity with the Canadian dollar for the first time in 30 years.
That helped attract a flood of speculative money into oil contracts, said Ray Carbone, a broker and trader on the Nymex floor with Paramount Options.
A declining dollar raises oil prices as oil is priced in dollars worldwide, so producer nations, such as OPEC, are less likely to increase production if the value of oil is declining. Also, a falling dollar makes oil less expensive for consumers outside the U.S., encouraging more consumption.
"As long as you have a weak dollar, you're going to have higher oil prices," said Carbone. "There's lots of speculation going on in commodities prices in general."
The dollar's recent fall was sparked when the Federal Reserve lowered its key funds rate - an overnight rate it charges to banks and one that affects the amount people pay on everything from mortgages to credit cards - from 5.25 percent to 4.75 percent Tuesday.
While the move may stimulate economic growth domestically - which also pushes oil prices higher - it hurts the dollar as the lower interest rate makes some dollar-denominated investments less attractive for foreign investors.
Traders were also keeping a close eye on storms brewing in the Gulf of Mexico. Oil companies have already evacuated several platforms, but so far production hasn't been cut dramatically.
Thursday is the seventh record close for crude in the past eight sessions. So far this year, crude has soared $22.27 a barrel, a gain of 36.5 percent.
Although crude is at a record high in nominal terms, it is still below the inflation-adjusted highs of around $95 a barrel set in the early 1980s following the outbreak of the Iran-Iraq war.
Traders have also cited declining crude inventories in the U.S. as another reason for oil's record run.
On Wednesday the Energy Information Administration said crude stocks fell by 3.8 million barrels last week, more than twice the drop expected.
Oil prices have more than quadrupled in the last five years, going from around $20 a barrel in 2002 to more than $80 today. Most analysts cite rising global demand coupled with limited new supplies as the underlying reason behind the jump.
The tight supply-demand scenario has exaggerated the effects of geopolitical tensions, as there is less spare capacity to make up for a potential disruption in supplies.
Carbon said Israel's recent military action in Syria is also weighing on the minds of traders, as is tougher rhetoric by France towards Iran over that country's nuclear program as well as the bombing of a pipeline in Beiji (about 150 miles outside Baghdad) on Tuesday.
"These tensions are certainly on the minds of people when they speculate on oil," he said. "If anything happens, it will get us to $100 a barrel in short order." 
