Oil closed Thursday up $2.95 to $102.59 per barrel -- another record-high print close -- after a combination of geopolitical, production, and trading factors sent investors piling into crude oil futures as an investment/inflation hedge, Bloomberg News reported Thursday.

Earlier in the day oil hit an intra-session high of $102.70 -- within 10 cents of the all-time high, in inflation-adjusted terms, of $102.80 per barrel set in April 1980.

The other major energy commodities also rose. Heating oil surged about 6 cents to $2.83 per gallon, unleaded gasoline climbed about 2 cent to $2.49, and natural gas rocketed 39 cents to $9.45 per million BTUs.
'Hyper' oil market

Independent oil trader Jim Dietz told BloggingStocks Thursday oil "is becoming a magnet for investors and traders everywhere."

"We can now officially call this a hyper oil market," Dietz said. "We've had solid days up and long climbs during this bull run, but now it seems like everyone wants a piece of the action. To be honest, I don't know where it ends."

Dietz said the market had been on edge from the start of trading due to Turkey's continued military action and border violation against the Kurds in the Kurdistan province of Iraq. Iraq produces about 3 million barrels of oil per barrel. Later, word that output may have been reduced in Nigeria as a result of possible military attack "just sort of spooked the market" and the bulls were out in force, he said.

"Then we had our seemingly daily appearance by the hedges [hedge funds] which gave the market another jolt, and before you know it we're up about $3," Dietz said. "Crude oil inventories are the highest they're been in five years in the [United] States, but the market does not care. The market is looking right past that important fundamental."

Next stop $110?

Dietz said unless traders begin to evaluate the market more objectively, "the market will take out $110." Technically, there is no resistance to stop it, he added.

"This market is trading now 10% on fundamentals and 90% on psychology," he said, adding that he recorded one winning trade during the day, his only day trade, an oil long trade. Dietz also has monthly long positions open in oil, gasoline and heating oil.

Dietz added that U.S. inflation expects are adding to the oil's bullish sentiment.

"In addition to the hedge funds, we have investors increasing oil positions as an inflation hedge," Dietz said. "That's adding at least $5 to oil's price, probably more."

Dietz added that continued, solid emerging market oil demand is a factor supporting the bull's case, but demand in the United States, the world's largest oil consumer, is moderating, something that historically helps put a lid on prices, and, in softer markets, prompted large price declines.

"Eventually, the market will recognize the U.S.'s more modest demand picture, but as of now, the bulls are firmly in charge," he said.