OIL set a record above US$115 a barrel yesterday as a drop in United States gasoline inventories raised concern of tighter supply and a weak dollar boosted investor demand for commodities.

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

"The helpful thing for the market is the further erosion in product stocks," said Christopher Bellew, senior vice president at Bache Commodities. "Technically, the market still looks bullish."

US crude set a record of US$115.54 a barrel and by 1051 GMT was trading at US$114.92, down 1 cent. Oil has hit new peaks for three consecutive days. London Brent set a record of US$113.38.

Gasoline stocks in the US fell by 5.5 million barrels in the latest week, the US Energy Information Administration said, more than the 1.8-million-barrel decline analysts expected.

"Summer driving season is coming. And even in a recessionary economy, seasonal gasoline demand will pick up, which adds to stress on the global oil supply chain," said 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.

London's gas oil, the benchmark for heating oil and diesel in Europe, set the pace for crude oil and refined product futures, gaining 0.7 percent to US$1,052.00 a ton.

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