LONDON - Oil prices spiked Wednesday to fresh one-year highs above 81 dollars as investors reacted to plunging US gasoline (petrol) reserves and a tumbling greenback, traders said.
New York's main contract, light sweet crude for December delivery, soared as high as 81.73 dollars per barrel, a level last seen in October 2008.
Brent North Sea crude for December delivery also rallied to a one-year high at 79.98 dollars.
The US government's Department of Energy (DoE) announced Wednesday that gasoline reserves sank 2.3 million barrels in the week to October 16.
That was far more than expectations of an 800,000-barrel drop, according to traders polled by Dow Jones Newswires.
Torbjorn Kjus, analyst at DnB NOR Markets, described the sharp gasoline drop as "bullish" -- indicating that it was likely to push oil prices higher.
The DoE's weekly report is a key focus for the market because the United States is the world's biggest energy consuming nation, followed by number two China.
The latest price peaks also came after the European single currency breached the key 1.50-dollar level to hit fresh 14-month highs as many investors deserted the US unit in favour of higher yielding assets, dealers said.
The falling greenback makes dollar-priced oil cheaper for buyers holding stronger currencies and therefore tends to stimulate crude demand and prices.
In late London trade, the euro struck 1.5023 dollars, a level last seen in August 2008, up from 1.4937 dollars in New York late on Tuesday.
In earlier commodity trading on Wednesday, oil prices had fallen as investors took profits from a rally the previous day which saw New York crude breach 80 dollars per barrel for the first time in one year.
A weak dollar and an upbeat mood about the global economic recovery are driving the recent gains in prices, according to oil industry watchers.
Despite topping 80 dollars, oil prices finished Tuesday in negative territory after downbeat data from the ailing US property sector.
US housing starts grew in September but the pace was softer than anticipated while permits for construction fell sharply, government data showed.
OPEC is meanwhile ready to invest funds to aid the production of oil amid a recovery in demand and rising prices for crude, the cartel's chief Abdalla Salem El-Badri said on Tuesday.
El-Badri, speaking at a London energy conference, also argued that 60-70 dollar oil would not be enough to allow adequate investment levels by OPEC, which pumps 40 percent of the world's oil.
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