Oil hovers above $118
Weak dollar, supply concerns support prices. Traders eye inventory report. Retail gas jumps to record $3.53 a gallon.
SINGAPORE (AP) -- Oil prices steadied Wednesday after climbing in the previous session to a record near $120 a barrel on the weakening U.S. dollar and concerns about unstable supply amid firm global demand.
The dollar's drop to a record low Tuesday against the euro helped draw more funds from investors who see commodities such as oil as a hedge against inflation and a falling dollar. A weaker greenback also makes oil cheaper for investors overseas.
"The bulls are certainly in control of the oil market right now," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The dollar continues to face a lot of pressure, it is likely to further weaken and that will continue to underpin prices."
Meanwhile, retail gasoline hit another record high. The national average price for a gallon of regular unleaded gasoline rose to $3.533, up more than two cents from the previous day's price of $3.511, according to auto group AAA.
Many analysts expect the Federal Reserve to cut interest rates further this year to try to shore up the ailing U.S. economy, a move that would likely further weaken the dollar.
Light, sweet crude for June delivery rose 5 cents to $118.12 in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
The May contract, which expired Tuesday, rose as high as $119.90 in its last trading session and closed at $119.37. The more active June contract, now the front-month, settled at $118.07 a barrel, up $1.44.
Oil is now nearly double its closing price a year ago, and up 24% in 2008.
Supply constraints also supported prices. A Royal Dutch Shell PLC joint venture declared what's known as force majeure on April and May oil delivery contracts from a 400,000-barrel-a-day Nigerian oil field due to a pipeline attack last week. The move protects the company from litigation if it fails to deliver on contractual obligations to buyers.
In Mexico, oil production slipped 7.8% in the first quarter to 2.91 million barrels a day as output at the country's oil fields waned, state oil company Petroleos Mexicanos said. In Scotland, workers at Ineos PLC's 196,000 barrel-a-day Grangemouth refinery and petrochemical plant threatened to strike over changes to an employee pension plan.
At the same time, global oil demand is expected to rise about 1.3 million barrels a day this year to 87.2 million barrels a day, according to the International Energy Agency. China imported a record 4.09 million barrels a day of crude oil last month, final data from its General Administration of Customs showed Tuesday.
"Even though U.S. demand is showing signs of decline, China is going very strong," Shum said.
A major conference of the world's largest oil consumers and producers ended Tuesday with a measured statement about the risks of oil prices. The International Energy Forum, after meeting in Rome this week, said in a statement that "oil prices should be at levels that are acceptable to producers and consumers to ensure global economic growth, particularly in developing countries."
A U.S. government fuel inventory report to be released later Wednesday was expected to show U.S. gasoline inventories fell last week by 2.1 million barrels, according to a Dow Jones Newswires survey of analysts.
Crude oil stocks were expected to increase 1.1 million barrels in the U.S. Energy Department's Energy Information Administration's report, the survey showed.
Stocks of distillate, which includes heating oil and diesel fuel, were expected to fall 300,000 barrels.
In other Nymex trading, heating oil futures added 0.17 cent to $3.3186 a gallon (3.8 liters) while gasoline prices fell 0.34 cent to $3.013 a gallon.
Natural gas futures fell 3.3 cents to $10.574 per 1,000 cubic feet.
In London, Brent crude fell 5 cents to $115.90 a barrel on the ICE Futures exchange. 
