Fears of dwindling stockpiles in the United States and a falling dollar push crude closer to $100.
NEW YORK (CNNMoney.com) -- Oil prices jumped over $96 a barrel Tuesday, setting another record high, as traders bought on fears of dwindling supplies in the United States.
U.S. light crude for December delivery gained $2.15 to trade at $96.13 a barrel in electronic trade, surpassing the previous intraday record of $96.05 set Friday.
Analysts expect a 1.6 million barrel drop in domestic crude supplies when the government issues its weekly inventory report Wednesday.
"The oil market is really supported by the tight inventories in the U.S. market, and the general expectations for the inventory report this week are that the crude inventories will likely fall," Victor Shum of Purvin & Gertz in Singapore, told the Associated Press.
Most of the decline is being blamed on an outage from Pemex, Mexico's national oil company. Mexico, after Canada, is the second largest source of imported U.S oil.
The drop would follow last week's decline of more than 5 million barrels. It would also come while refineries are shutting down for planned maintenance - a time that should see rising supplies of oil as refineries turn less of it into gasoline.
The continuing weakness of the U.S. dollar, which hit $1.4556 against the euro earlier Tuesday, also contributed to climbing oil prices.
Analysts think some traders and investors will try to push oil prices to the psychologically important $100 level this week.
Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.
"The market remains bullish and seems to be on an upward trend to hit the psychologically important $100 level," said Shum. "While it is on the uptrend, there is a tremendous amount of volatility," he added.
Crude prices have spiked more than 20 percent in the last three weeks. The jump is unusual because this time of year is known as a shoulder season - marked by slack demand - between the summer driving and winter heating months.
Fighting between Turkey and the Kurds in oil-rich northern Iraq, reports showing demand outpacing supply in the fourth quarter, a falling dollar and speculative investing have all been cited as reasons for the runup.
Crude oil prices have surged nearly five-fold since trading below $20 a barrel in 2002. Analysts say surging global demand combined with limited new supply is the main underlying factor.
The surge in prices has also attracted lots of speculative investment money, further driving prices higher.
And the tight supply and demand situation magnifies the effect that geopolitical tensions have on prices, as there is less spare supply available globally to cover disruptions from places like Iran, Nigeria or Venezuela.
The falling U.S. dollar has also played a role, as oil worldwide is priced in dollars.
Oil-producing nations have less incentive to ramp up output if the buying power they receive per barrel is declining, and foreign consumers have less incentive to reduce demand if oil is, relatively, getting cheaper for them.