Oil climbs to new record above $144
Crude jumps as government reports a decline in crude stockpiles and a rise in gasoline supplies. Global tensions and the dollar also weigh on the markets.
NEW YORK (CNNMoney.com) -- Oil prices rose to a new record Wednesday as traders mostly looked past a mixed inventory report to focus on continued geopolitical instability, currency issues and a looming jobs report.
Light, sweet crude for August delivery rose $2.60 to settle at a record $143.57 a barrel on the New York Mercantile Exchange. The August contract then rose to a new record high of $144.32 in electronic trading after floor trading had settled for the day at 3 p.m. ET.
Oil rose nearly $2 in the last half-hour of Wednesday's session, as traders boosted their positions in anticipation of more bad news ahead of the long holiday weekend.
Mixed inventory report: "With traders taking off for the holiday weekend, everyone's going long," said Phil Flynn, senior market analyst at Alaron Trading. "Thursday's job numbers are expected to be ugly, the dollar is weak, so if you're going into the weekend, why would you want to be short on oil with bad news?"
The Energy Information Administration's weekly inventory report showed crude supplies fell slightly more than expected while gasoline stockpiles unexpectedly rose.
The EIA said crude stocks fell by 2 million barrels last week. Analysts were looking for a drop of 1.2 million barrels according to a poll by energy research firm Platts.
Distillates, used to make diesel fuel, jet fuel and heating oil, rose by 1.3 million barrels while gasoline supplies rose by 2.1 million barrels. Analysts were looking for an increase of 2.4 million barrels in distillates supplies and a decline of 500,000 barrels in gasoline stockpiles.
"Gas stocks are building as domestic demand has softened," Flynn said.
The EIA report also showed demand for gasoline last week averaged 9.3 million barrels per day, down by 1.7% from the same period last year.
Meanwhile, crude supplies shrunk because prices are so high.
"Refiners aren't going to store oil at $140 a barrel," Flynn said. "There's no reason to put it in storage."
Traders also digested Tuesday's report from the International Energy Agency predicting tight oil supplies worldwide despite soaring prices and falling demand in the U.S. and Europe.
Geopolitics: "Based on expectations, [the EIA report] looks bullish for oil and bearish for gas, But there are other issues supporting the market," said Flynn.
The oil market continued to be wary of geopolitical issues, including tensions in the Middle East and Nigeria, as sources of potential supply disruption.
Ongoing tensions between Israel and Iran over potential attacks on the Islamic republic's nuclear facilities also impacted the oil market.
There is a perception in the market that "it's just a matter of time" before the two nations clash, Beutel said.
Over the weekend, the commander of Iran's Revolutionary Guards warned that Tehran would respond to an attack by barraging Israel with missiles and could seize control of a key oil passageway in the Persian Gulf, the Strait of Hormuz.
That sentiment was echoed Wednesday by Iran's oil minister who said that an attack on his country would provoke a fierce response, the Associated Press reported.
Minister Gholam Hossein Nozari said, however, that Tehran would not cut oil deliveries and would continue supplying the market even if struck by Israel or the United States, according to the AP.
Nigeria, Africa's largest crude producer, has also been a source of concern for the oil market recently.
Labor disputes and attacks on oil installations by militant groups have cut Nigeria's production to its lowest level in nearly two decades.
ECB: The oil market also anticipated news from the European Central Bank, which was widely expected to announce an interest rate hike Thursday.
An interest rate hike in the euro zone could strengthen the 15-nation euro and hurt the dollar.
The euro rose Wednesday to $1.5873 from $1.5793 late Tuesday.
Many analysts said the dollar's decline is largely to blame for high oil prices.
In addition to the stronger euro, the dollar has also been undermined by weakness in the U.S. economy.
Jobs data: Oil traders will be looking for signs of the economy's health on Thursday when the Labor Department reports on non-farm payrolls and the nation's unemployment rate in June.
Economists expected the report to show that payrolls shrank by 60,000 in June and that the unemployment rate eased to 5.4% from 5.5% in May.
Gas: Retail gas and diesel prices rose overnight, with gas hitting a new record high.
The national average price for a gallon of regular gas rose 0.5 cent overnight to $4.092, a daily survey by motorist group AAA showed.
The survey also showed that the national average price for diesel fuel rose to $4.767 from $4.762 the day before. 
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