A US government report on Wednesday showed a surprise drop in crude inventories and a larger-than-expected decline in stocks of petrol. Demand for motor fuel usually peaks in the summer.

'Summer driving season is approaching. Even in a recessionary economy, seasonal petrol demand will pick up, which adds to stress on the global oil supply chain,' said Mr Jan Stuart at UBS.

'But before we get there, the stress already put onto the supply chain globally by middle distillate demand and supply dynamics is not still abating,' he said in a research note.

US crude set a record of US$115.54 a barrel and by 0958 GMT (5.58pm Singapore time) yesterday was trading at US$115.24, up 31 US cents.

Oil has hit new peaks for three consecutive days. London Brent advanced as much as 72 US cents to a record US$113.38 a barrel on London's ICE Futures Europe exchange.

London's gas oil, - the benchmark for heating oil and diesel in Europe - set the pace for crude oil and refined product futures, gaining 1.1 per cent to US$1,056.25 a tonne.

In the latest indication of strong demand for middle distillates, China's top refiners were set to extend unusually high imports into a sixth straight month.

PetroChina, China's second-largest refiner, has bought 300,000 tonnes of gas oil for next month, traders said.

The weakness of the dollar continued to attract investors into commodities to hedge against inflation and bet oil's rally would help compensate for the shrinking value of dollar assets in their portfolios.

The dollar has declined 13 per cent on a trade-weighted basis in the past 12 months, as the collapse of the US sub-prime mortgage market prompted the Federal Reserve to cut rates to prevent bank losses from pushing the US economy into a recession.

REUTERS