Feb. 26 (Bloomberg) -- Crude oil rose above $100 a barrel to a record close in New York as the U.S. dollar fell to an all-time low against the euro, prompting some traders to invest in commodities as a hedge against inflation.

Reports today showed that U.S. home prices tumbled, consumer confidence weakened and producer prices rose last month. Hedge- fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended Feb. 19, a Commodity Futures Trading Commission report showed.

``The continuing upward pressures from the weakening dollar, geopolitics, and the use of energy as an inflation haven continues apace,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``There is an inflation wave ripping through commodities of all stripes.''

Crude oil for April delivery rose $1.65, or 1.7 percent, to settle at $100.88 a barrel at 2:48 p.m. on the New York Mercantile Exchange. It was the highest close since trading began in 1983. Prices touched $101.06 a barrel today. Futures reached $101.32 a barrel on Feb. 20, a record intraday price. Prices are up 64 percent from a year ago.

Brent crude for April settlement rose $1.78, or 1.8 percent, to $99.47 a barrel on London's ICE Futures Europe exchange, a record close. Futures reached $99.75 a barrel, the highest since trading began in 1988.

Speculation, Fear, Psychology

``The market is being driven by speculation, fear and psychology,'' said Stephen Schork, principal of the trading firm The Schork Group Inc. in Villanova, Pennsylvania. ``There were some investors who shorted oil when we reached $100 last week, for whatever reason, and they panicked today.'' Shorts are bets that prices will decline.

Investors have pushed prices higher in the past six years as they put money into energy because returns outpaced those of other markets.

``There is no way one could expect energy prices to remain moribund versus the outsized gains in other commodities recently,'' Kilduff said. ``Whatever your opinion about the overall economy, commodity inflation is as real as it gets right now.''

The UBS Bloomberg Constant Maturity Commodity Index gained as much as 1.8 percent to 1,482.657 today, the highest ever. Platinum, wheat and soybeans have all been pushed to records this month.

`A Palpable Fear'

``There's a palpable fear of inflation,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons in St. Louis. ``We are seeing a massive flow into commodities.''

The dollar weakened to $1.4979 per euro at 2:49 p.m. in New York, from $1.4830 yesterday. It fell past the previous historic low of $1.4967, set on Nov. 23. The dollar declined against all of the world's 16 biggest currencies in the past 12 months apart from the Korean won and South African rand.

OPEC crude-oil supply will fall by 200,000 barrels a day, or 0.6 percent, to 32.45 million barrels a day this month, according to preliminary estimates from PetroLogistics Ltd. The group supplied 32.65 million barrels a day in January, data from the Geneva-based tanker-tracking service showed.

Ministers from the 13 members of the Organization of Petroleum Exporting Countries are scheduled to meet in Vienna on March 5 to discuss oil quotas. OPEC produces more than 40 percent of the world's crude oil.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: February 26, 2008 16:21 EST