Crude oil dropped from a record in New York on concern that energy demand may fall at a time of increased supplies.

Oil futures fell as traders sold to lock in the 26 percent gain since prices started a rally on Feb. 6 sparked by declines in the dollar against the euro and the yen. U.S. crude inventories last week rose more than analysts forecast, while gasoline supplies jumped to the highest since 1993.

High stockpiles "are an indication that demand is slowing down in the U.S.," said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. "That's a perfect example of the disconnect between fundamentals and oil pricing."

Crude oil for April delivery fell as much as 73 cents, or 0.7 percent, to $109.60 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $109.80 at 2:09 p.m. Singapore time.

Futures yesterday settled at a record $110.33 a barrel after reaching $111, the highest since trading began in 1983, as the dollar fell below 100 yen for the first time since 1995 and dropped to an all-time low against the euro.

Brent crude for April settlement fell as much as 90 cents, or 0.8 percent, to $106.64 a barrel on London's ICE Futures Europe exchange. It was at $106.97 at 2:07 p.m. Singapore time. The contract yesterday closed at an all-time high of $107.54 a barrel after reaching an intraday record of $107.88.

'Downside Risk'

The April contract expires today. The more-active May futures were down 61 cents at $105.84 a barrel at 2:30 p.m. Singapore time.

"With the ongoing divergence between the weakening fundamentals and the rising price, we see clear elements of a bubble in the crude oil market," said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. "While that bubble may expand further before it pops, we definitely see less upward potential here against a growing downside risk."

Stockpiles of crude and oil products in the developed economies of the Organization of Economic Cooperation and Development, or OECD, rose by 32.6 million barrels in January, reaching 2.62 billion barrels, the International Energy Agency said on March 11.

Gasoline inventories in the U.S. rose 1.69 million barrels to 236 million barrels last week, the highest since 1993, the Energy Department said March 12 in its weekly report. Crude oil stockpiles climbed 6.18 million barrels to 311.6 million barrels versus a forecast of 1.68 million barrels.

Tumbling Dollar

The tumbling dollar has drawn investors to the crude market as commodities become cheaper for buyers with other currencies.

"It's been financially driven," said Rowan Menzies, head of research for Commodity Warrants Australia Ltd. in Sydney. "When you think it's going to drop, the dollar weakens and takes it back up again."

The dollar dropped as low as $1.5651 per euro, the weakest since the European currency's debut in 1999. It traded at $1.5620 at 2:06 p.m. in Singapore. The dollar fell as low as 99.85 yen, the second day it has gone below 100 yen and near the weakest level since October 1995.

Traders expect the U.S. Federal Reserve to lower its benchmark rate by 0.75 percentage point to 2.25 percent, based on futures prices. The Federal Open Market Committee's next regular meeting is March 18.

"The weak dollar is a factor, but investors also believe that supplies of natural resources are stretched," said Purvin & Gertz's Shum. "If the dollar continues to weaken, then the bubble may get bigger before some air comes out of it."

Inflation Adjusted

On Oct. 15, prices passed the previous all-time inflation- adjusted record reached in 1981 when Iran cut oil exports. The cost of imported oil used by U.S. refiners averaged $39 a barrel in February 1981, according to the Energy Department, or $92.50 in today's dollars.

Crude oil may fall next week on signs that U.S. inventories will rise as the slowing economy curtails fuel consumption.

Sixteen of 37 analysts surveyed by Bloomberg News, or 43 percent, said prices will drop through March 20. Thirteen of the respondents, or 35 percent, said futures will rise and eight forecast that prices will be little changed. Last week, 45 percent said oil would decline.