Oil steady after record near $124, with bulls in control

Analysts had no clear answer for what prompted a surge that pushed prices past $120 for the first time earlier this week.

The fact that prices didn't decline sharply after the weekly U.S. inventory report signaled to some investors that the market was ripe for another rally.

"The bulls are in control and there's a lot of momentum driving the oil price up," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Participants now tend to focus on only the bullish elements of the news out there."

Light, sweet crude for June delivery fell 28 cents to $123.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.69 on Wednesday to a record finish of $123.53 a barrel.

It later jumped to a trading record of $123.93 a barrel in the electronic session.

Oil prices at first waffled on Wednesday as traders were torn between relief that crude and gasoline supplies are rising and worries about rising demand and falling distillate stockpiles.

"Another example of ... zeroing in on the bullish news is this inventory report out of the U.S.," Shum said.

The Energy Department's Energy Information Administration said in a weekly report that inventories of distillate fuels, which include diesel and heating oil, fell unexpectedly while gasoline demand rose slightly last week. Traders chose to focus on those numbers and shrug off crude inventories, which rose much more than analysts predicted, and gasoline supplies, which increased when expected to decline.

Some evidence that investors were buying simply to keep up with the market's momentum came from the fact that a stronger dollar has had little or no impact on trading.