Oil market analysts think Opec is likely to cut production in March

The main contract for light sweet crude closed at $100.74 a barrel, up 73 cents. At one stage during the session it rose as high as $101.32 per barrel.

Traders again blamed worries that the Opec oil producing nations might announce production cuts at their meeting on 5 March.

Opec, which supplies 40% of the world's oil, is concerned that the slowing US economy is reducing the demand for oil.

Hedge funds

"Supply worries and comments by some Opec members that the group might not raise output at their March meeting provided the catalyst for the sharp rally," said Kevin Norrish, an analyst at Barclays Capital.

Traders said that hedge funds were buying up oil.

Their interest has been prompted by rising inflation.

"Traders are going into the oil market because it's what is causing the inflation and those assets are most likely to appreciate," said Rob Kurzatkowski, futures analyst with optionsXpress.

There is concern that higher oil prices will boost inflation.

To counter that investors have been putting their money into gold, which hit a record on Wednesday.

The main gold contract at the New York Mercantile Exchange closed $8 higher at $937.80 an ounce.