NEW YORK (CNNMoney.com) -- Oil continued to rally to its highest level in 14 months Wednesday as colder temperatures and a weaker dollar boosted demand despite a weekly inventory report that showed a surprise rise in crude supplies.
What prices are doing: Crude oil for February delivery rose $1.41, nearly 2%, to settle at $83.18 a barrel, the highest settlement since Oct. 9, 2008. That topped Tuesday's close, a 14-month high of $81.77.
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Prices fell below $81 a barrel earlier in the session after government released its inventory report.
What's moving prices: The Energy Information Administration reported crude supplies posted a surprise increase of 1.3 million barrels. Analysts were expecting crude stocks to drop by 1.6 million barrels, according to a consensus estimate collected by energy information provider Platts.
In Cushing, Okla., the major delivery point for U.S. crude, supplies rose to a record 35.67 million barrels. The previous record was posted in February, when crude stocks piled up to 34.92 million barrels.
The report shows gasoline stockpiles rose by 3.7 million barrels, more than three times the 1.2 million barrel boost analysts were expecting. Distillate, used to make heating oil and diesel, fell by a modest 300,000 barrels. Analysts were expecting inventories to drop by 1.8 million barrels.
But prices were were boosted by colder temperatures across the nation and a weaker dollar, which fell against the euro and the pound. Crude oil, like other commodities, is priced in dollars, and a weaker greenback lifts prices.
What analysts are saying: While oil prices were pressured initially by the inventory report, the rise in supplies didn't weigh prices down for long.
"The increase wasn't an eye-popper, and it's doesn't really change the picture a whole lot," said James Cordier, president of Liberty Group Trading. "Until the cold weather breaks, we will have continued upward pressure on the market."
Cordier expects oil to trade in between $80 and $83 a barrel, then drop back into the high $70 range as the weather moderates.
Corider added that speculative money has also returned to the market, and investors are buying commodities including oil, gold and silver at the start of the year. 
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