OIL prices slipped from record highs yesterday after a drop in US inventories and the weaker dollar had pushed prices above US$115 a barrel.

US crude settled down 7 cents at US$114.86 a barrel after rallying to an all-time peak of US$115.54. London Brent settled 23 cents lower at US$112.43 a barrel, off the record US$113.38 set earlier.

US crude inventories fell unexpectedly last week, while a drop in gasoline stocks exceeded analyst expectations, a government report said on Wednesday, raising supply concerns as the world's top consumer gears up for the summer driving season.

Gasoline stocks in the United States fell by 5.5 million barrels in the latest week, more than the 1.8-million-barrel decline analysts had expected.

"Summer driving season is approaching. And, even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain," Jan Stuart at UBS said in a research note.

"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 added.

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

Oil prices have more than quadrupled since 2002 as supply struggles to keep up with booming demand, especially in China and other emerging economies.

The slide in the US dollar has supported prices for oil and other dollar-denominated commodities, luring investors seeking to hedge against inflation and compensate for the shrinking value of dollar assets in their portfolios.

The dollar pared gains after the Philadelphia Federal Reserve's business index fell sharply in April, adding to concern about the health of the US economy.

Earlier, the dollar had gained against the euro after Jean-Claude Juncker, chairman of euro zone finance ministers, spoke out against the single currency's rise.