Oil retreated on Wednesday after earlier closing in on the $100 milestone in response to a new slump in the dollar. U.S. light crude surged to a record $99.29 early in the session but then edged off this peak to stand at $97.53, down 50 cents, at 4:23 p.m. London Brent crude was down 24 cents at $95.25. U.S. crude oil inventories fell by a surprise 1.1 million barrels last week, according to data from the U.S. Energy Information Administration. Analysts had predicted a rise of 600,000 barrels. But crude stocks rose at the key U.S. delivery point at Cushing, Oklahoma, which helped to depress prices. Distillates, which include heating oil, fell by 2.4 million barrels, a much bigger drop than the 300,000 barrel decrease that had been forecast. “The crude draw is bullish, however the market will be rangebound due to people being out for the holiday,” said Dan Flynn, analyst at Alaron Trading, referring to the U.S. Thanksgiving holiday starting on Thursday. Oil is up by about 45 percent since mid-August, driven by increased speculative investment, tighter supplies and a slide in the dollar. The dollar’s fall to record lows against the euro has spurred buying of relatively cheap dollar-denominated commodities. The dollar sank to a new record low against the euro and versus a basket of currencies on Wednesday after the U.S. Federal Reserve cut its growth outlook for next year, boosting chances of another interest rate cut in December. Worries about a U.S. slowdown helped trigger sharp falls on Wall Street, with the Dow Jones industrial average down more than one percent. High oil prices could intensify pressures on the fragile U.S. economy, which could ultimately hurt demand for oil. The rising cost of oil, for example, could force more than three-quarters of Americans to tighten their budgets by cutting fuel use or by slashing spending elsewhere, according to a Reuters/Zogby poll. Some 32.5 percent of people surveyed said they would drive less if oil prices kept rising, while 20.8 percent said they would try to conserve energy at home and 22.8 percent said they would cut spending on retail and entertainment. Gold and platinum have also rallied in response to the falling dollar, although copper and zinc have slumped to multi-month lows on concerns the U.S. mortgage crisis could slow economic growth and demand. U.S. Energy Secretary Sam Bodman has said producers need to pump more to bring prices down from levels that are close to a record in nominal and inflation-adjusted terms. But the Organization of the Petroleum Exporting Countries, which meets on December 5 in Abu Dhabi to chart supply policy, has said the market is well-supplied and it is up to consumer countries to curb speculation through regulation.

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