Oil prices closed at their highest level since October 28th after a settle price of $91.86 on Wednesday. The current (January 13) price is $91.79 on the New York NYMEX for one barrel of light sweet crude futures scheduled for February delivery.

Increased demand for oil, lower inventory levels, and speculative interest are credited for driving oil to its current levels.

Strong gains this week in the euro have also aided oil prices, which have climbed around $4 after dipping below $89 to start the new year.

The euro is currently getting $1.3242, up roughly 3 pips this week thanks to a successful bond auction in Portugal.

In its latest report on US crude oil inventory levels, the Energy Department said supplies fell 2.2 million barrels to 333.1 million barrels last week. The McGraw-Hill Cos. Platts survey of analysts showed a much more modest decline of 300,000 barrels was anticipated.

Such a strong drop in inventory levels suggests increased demand among businesses and consumers for petroleum-based products in early 2011.

Speculative interest in oil is predicted to increase given oil’s current position just shy of the important $100 mark.

While many analysts believe oil is overpriced based on current supply and demand measures, the proximity to the century mark could prompt investors to push hard to drive oil through that level before profiting gains.

A weaker dollar in the last several days has also boosted oil prices. The dollar has been down against most major currencies, including the euro and pound, and the Japanese yen.

Rough news Thursday on the job front could spell more trouble for the dollar. The question is whether the dollar or speculation about future oil demand will bear the brunt of the news.

According to the Labor Department, the number of workers seeking unemployment benefits climbed by 35,000 the week ending January 8th, for a seasonally adjusted total of 445,000.

This is the most benefits claims since October and quickly halts recent data (including unemployment at 9.4 per cent) that offered a glimmer of hope for job seekers. Retailers dropping temporary holiday workers is credited for much of the rise in new claims.