March 3 (Bloomberg) -- Crude oil surged above $55 a barrel in New York, less than $1 short of a record, and reached a record in London on speculation that increasing consumption will outpace production this year.

``Demand is still growing, particularly in China, and there is only a finite supply of oil out there,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York.

Oil jumped 18 percent in the past month as OPEC and the International Energy Agency have increased oil-use forecasts. Hedge-fund managers and other large speculators have moved into energy markets because the returns have been better than in the stock market. Gasoline has also jumped to a record on fund buying as refinery disruptions threaten to limit U.S. supply.

Crude oil for April delivery rose $1.65, or 3.1 percent, to $54.70 a barrel at 12:19 p.m. on the New York Mercantile Exchange. Prices touched $55.20 a barrel, the highest since Oct. 27. Oil closed at $53.05 yesterday, the highest since Oct. 26. Futures are up 53 percent from a year ago.

In London, the April Brent crude-oil futures contract rose $1.48, or 2.9 percent, to $52.70 a barrel on the International Petroleum Exchange, the highest intraday price since Brent futures began trading in 1988.

Last week funds had their biggest bet on higher oil prices in eight months, according to the Commodity Futures Trading Commission. Speculative long positions in crude oil, or bets that prices will rise, outnumbered short positions by 54,176 contracts, the commission said. Net longs peaked at 82,451 in March 2004.

``The increase in buying by the funds is making the market more volatile,'' Bentz said. ``They are looking at the big picture, not the weekly inventory data.''

U.S. Economic Growth

Growth in the U.S. services economy accelerated last month and a measure of hiring in those industries surged to a record, a private survey released today found. The Institute for Supply Management's index of non-manufacturing enterprises rose to 59.8 in February after dropping to 59.2 the month before.

Gross domestic product, the broadest measure of the economy, increased 4.4 percent in 2004, the most in five years. Forecasts, including a Bloomberg survey, call for growth of about 3.5 percent to 3.6 percent this year. The U.S. consumes a quarter of the world's oil.

``Demand in the U.S. is clearly not slowing down at all,'' said Jay Saunders, an energy analyst at Deutsche Bank Securities Inc. in New York. ``Consumption grows with the economy.''

Oil surged to a record $55.67 a barrel in New York on Oct. 25 because of high global demand, particularly from China, and the threat of disruptions to oil shipments from Iraq, Russia and Nigeria.

``Russian production growth looks set to slow and the government's policies are making investment less attractive,'' Saunders said. ``There are threats to supply from Iraq, Iran and even Saudi Arabia.''

OPEC Meeting

The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, is scheduled to meet in Isfahan, Iran, on March 16 to discuss second-quarter output levels. OPEC members are concerned that if inventories rise in consuming countries prices may plunge later this year.

``The market is underpinned by relatively tight supply- demand fundamentals,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``There are doubts about the ability and desire of OPEC to meet demand later this year and production growth in non-OPEC countries is sluggish.''

U.S. crude-oil supplies gained 2.4 million barrels to 299.4 million last week, the highest since July, according to a report yesterday by the Energy Department. Gasoline stockpiles rose 973,000 barrels to 224.5 million, the report showed.

Bullish Case

``Moves that would take weeks to achieve in the past now occur in hours,'' Bentz said. ``The inventory numbers weren't all that bullish. Only if you look beyond the short term does the bullish case become clear.''

Gasoline for April delivery rose 4.42 cents, or 3 percent, to $1.528 a gallon in New York. Prices touched $1.531, the highest intraday price since the contract began trading in 1984. Gasoline is 40 percent higher than a year ago.

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

Last Updated: March 3, 2005 12:34 EST