Oil prices rose to new heights on Tuesday, surging to almost US$114 a barrel after the dollar fell and concerns mounted about global supplies. United States (US) retail gasolene and diesel prices also struck new highs.

Traders honed in on a report by the International Energy Agency that said Russian oil production dropped this year for the first time in a decade.

The report raised concerns about whether the key oil-producing nation will have sufficient supply to help meet increasing global demand.

"In an emotionally driven market like we've got now, it just doesn't take much in the way of a headline to prompt a psychological response," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

Light, sweet crude for May delivery rose as high as US$113.93 a barrel on the New York Mercantile Exchange before backing off to US$113.58, up US$1.82 from Monday's record settlement price of US$111.76 a barrel.

Meanwhile, retail gasolene prices rose to a new average national record of US$3.386, according to AAA and the Oil Price Information Service. Prices were highest in California, where mid-range and higher grades are now averaging more than US$4 a gallon.

Diesel prices jumped

Diesel prices at the pump jumped to US$4.119, also a record, setting the stage for higher prices on food and other goods transported by truck, ship and rail.

Oil's recent run above US$100 a barrel has been largely attributed to a steadily depreciating US currency because a weakening dollar prompts investors to seek a safe haven in hard commodities such as oil and gold.

Energy analyst and trader Stephen Schork described the rush into oil on the falling dollar as an automatic reflex.

"Traders on the Nymex saw the dollar take another tumble, so they did what they have been conditioned to do when the dollar falls, that is, they bought crude oil," he wrote in his daily Schork Report.

Energy watchdog

The report from the IEA - the Paris-based energy watchdog for industrialised countries - said Russia, the world's biggest oil exporter after Saudi Arabia, averaged 10 million barrels per day from January through March, down one per cent from 2007 and the first time production has failed to exceed previous-year figures since 1998.

Artyom Konchin, an analyst with Aton Capital, put Russia's oil supply lull down to high taxes and insufficient reinvestment into infrastructure that could increase production from existing fields.

"It's not that we don't have enough oil," he said. "We just don't have enough capital going into developing the fields."