U.S. crude jumped 39 cents to $102.98 a barrel by 0122 GMT, after hitting $103.05 in early morning trade, smashing the inflation-adjusted high of $102.53 reached in 1980, a year after the Iranian revolution.
The spike comes ahead of OPEC's meeting in Vienna next week, where most members now say they are unlikely to raise production due to hefty global crude and fuel stocks ahead of the second quarter.
"Hedge funds are taking advantage of the very weak dollar, but the fundamentals are very poor," said Makoto Takeda of Tokyo's Bansei Securities.
The Trans-Ecuadorean pipeline which pumps most of the oil extracted by Petroecuador in the Amazon jungle to ports on the Pacific Ocean was shut after a landslide punctured it.
The state oil firm Petroecuador initially said it would declare force majeure on shipments from the pipeline, but shortly thereafter reversed the decision, saying it would bypass the damage or use a private pipeline.
Oil surged late Thursday after a fire at the Bacton Gas Shell terminal in Norfolk, England, shut over 45 million cubic metres per day of gas supplies, about 13 percent of the UK national grid's forecast demand.
Shell said the fire had been extinguished and the plant had been shut down safely.
Federal Reserve Chairman Ben Bernanke said on Thursday that the United States would avoid a 1970s-style period of "stagflation" but acknowledged global price pressures could complicate central bank efforts to lift the economy.
The U.S. dollar dropped to an all-time low versus the euro after Bernanke's testimony did nothing to dispel expectations that interest rates are headed lower.
Prices of dollar-denominated commodities tend to rise when the currency weakens.
U.S. Energy Secretary Sam Bodman repeated calls for OPEC to lift production flows as consumers grapple with rising oil costs, the mortgage crisis and the credit crunch.
But Venezuelan Oil Minister Rafael Ramirez said there was no need for OPEC to increase production. The head of Libya's OPEC delegation Shokri Ghanem said earlier that the cartel most likely will leave output steady.
U.S. crude oil stocks rose for the seventh straight week last week, according to U.S. government data released Wednesday, while gasoline stocks are at 14-year highs.