Oil hits new record 

Oil prices surged more than $3 to a record above $132 a barrel on Wednesday after a US government report showed a surprise drop in crude stockpiles, reinvigorating fears of a worsening supply crunch.

The gains bring oil up more than 30% so far this year in a rally that has raised alarm bells in consumer countries like the United States, already hard hit by a housing slump and credit crisis.

"The market is in a very bullish mood and these statistics will do nothing to change that," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

US crude gained $3.30 to $132.28 a barrel by 1625 GMT after hitting a fresh peak of $132.69. London Brent rose $4.09 to $131.93.

The surge came after the US Energy Information Administration showed crude stockpiles in the world's biggest energy consumer fell 5.4 million barrels last week, countering expectations for a build.

"This report gives the market every reason to rally," said Rob Kurzatkowski, analyst at optionsXpress in Chicago.

The fall in weekly inventories is matched by concerns supply problems will continue for years as production continues to fall short of growth in demand. Oil for delivery in 2016 rose above $142 a barrel on Wednesday - making it the highest contract on the futures curve.

US Energy Secretary Sam Bodman said Wednesday that there was nothing the government could do to ease the pain of soaring fuel prices for consumers and added that a rise in speculative investment in commodities was not behind the rally.

"We have flat (oil) production ... and increasing demand," Bodman told reporters. "I don't think anything can be done near-term," he said.

Investors have also been drawn into the market by a weak US currency, which has made dollar-denominated commodities relatively cheap for holders of other currencies. The dollar slid to a one-month low against the euro on Wednesday on expectations of higher euro zone interest rates.

Speaking to Reuters during a visit to Venezuela, OPEC Secretary General Abdullah al-Badri said the soft dollar was one of the factors that could keep pushing oil higher.

The Organization of the Petroleum Exporting Countries (OPEC) has kept official policy unchanged, but its biggest producer, Saudi Arabia, has raised production and other members have overcome problems that had reduced supplies.

Tanker tracker Petrologistics said on Wednesday OPEC's oil output in May had risen by 700,000 barrels per day (bpd) compared with April.

The market has viewed the extra crude as insignificant compared with chronic underinvestment and refinery shortfalls.