Nov. 21 (Bloomberg) -- Crude oil climbed above $99 a barrel for the first time as a slumping dollar drew investors to commodities priced in the U.S. currency.

Futures in New York rose to within 71 cents of $100 as the dollar fell on speculation that the Federal Reserve will cut interest rates for a third time this year. The U.S. Energy Department is scheduled to release its weekly report on inventories later today.

``One hundred dollars seems possible today,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. ``Demand has been putting pressure on supply, we have the dollar weakening to a record low, and so perhaps it would just take a surprise drop in crude inventories to send it there.''

Crude oil for January delivery climbed as much as $1.26, or 1.3 percent, to a record $99.29 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $98.50 at 9:23 a.m. in London.

The contract climbed $3.39, or 3.6 percent, to $98.03 a barrel yesterday, the highest close since trading began in 1983.

``Nobody wants to sell,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. Oil has ``its own bullish factors, but on top of that, with the weaker dollar, prices kind of have to go up.''

Brent crude oil for January settlement gained as much as $1.04, or 1.1 percent, to $96.53 a barrel on the London-based ICE Futures Europe exchange, the highest since trading started in 1988. It was at $95.84 at 8:24 a.m. London time.

Dollar Decline

The dollar fell to $1.4856 per euro today, the weakest since the single European currency's debut in 1999. U.S. Federal Reserve policy makers yesterday lowered their growth forecast for 2008 on concern that the housing slump and credit market losses risked slowing growth in the world's biggest economy.

``The financial pundits all interpreted that to mean the Fed might cut interest rates again in December and that would further weaken the dollar,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``Oil has become a hedge for investors and the weaker U.S. dollar has contributed to the rise in gold and oil''

West Texas Intermediate, the New York-traded crude-oil benchmark, is up 61 percent this year. Oil has gained 44 percent in euros, 53 percent in British pounds and 48 percent in yen.

Crude also gained as distillate fuel prices surged to a record the day before an Energy Department report that may indicate supplies declined last week. Oil demand typically peaks in the fourth quarter during the Northern Hemisphere winter.

Heating Oil

Distillate-fuel stockpiles, which include heating oil and diesel, probably dropped 450,000 barrels, according to the median of 16 analyst estimates in a Bloomberg News survey. Prices also rose as forecasters said most of the U.S. will experience below-normal temperatures over the next two weeks.

Heating oil for December delivery rose as much as 2.09 cents, or 0.8 percent, to a record $2.7110 a gallon on the New York Mercantile Exchange. It was at $2.6920 at 9 a.m. London time and is up 55 percent from a year ago.

An Energy Department report today is expected to show that U.S. crude-oil inventories rose for a second time, gaining 750,000 barrels last week, according to the median estimate from a Bloomberg News survey of 16 analysts.

There will be no floor trading in New York tomorrow because of the Thanksgiving holiday in the U.S.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

Last Updated: November 21, 2007 04:33 EST