Oil surges to record above $101

NEW YORK (CNNMoney.com) -- Oil prices set an intraday record above $101 a barrel and reached another settlement high Wednesday, as traders took the Federal Reserve's weak economic report as a signal that more interest rate cuts are coming.

Crude prices reached as high as $101.32 a barrel in afternoon trading - crushing the intraday mark of $100.10 reached Tuesday - before settling at $100.74, up 73 cents from the previous top close of $100.01.

The $100-a-barrel milestone was first reached in early January.

The Federal Reserve said it expects to see higher unemployment for the rest of 2008, as well as a reduction in economic growth in the minutes released from its meeting in late January.

The Fed statement fueled perception that it may cut interest rates again to keep the economy afloat, which would also sustain demand for oil, said senior analyst Phil Flynn of Alaron Trading.

"The Fed has voted for bear," said Flynn. "More rate cuts mean a weaker dollar which could mean higher oil prices, higher commodity prices. It was enough to give us a boost."

He added that the U.S. gasoline demand report issued by MasterCard showed an increase last week from the previous week,"which could mean that consumers are taking the increase in gas prices a little better."

Crude traded lower earlier in the day after Goldman Sachs advised investors to sell to lock in profits. However, the investment bank said it expects oil to hit $105 a barrel by the end of the year, according to the Associated Press.

Wednesday marked the last day of trading for March crude oil contracts. The April contract was also above $100 a barrel.

"I still think we're heading to 120 bucks, but it's still overbought," said Mark Waggoner, president of Excel Futures.

Overall demand will push oil prices higher, predicted Waggoner, "but, short term, it will retreat to about $94."