By Pham-Duy Nguyen and Millie Munshi (Bloomberg)

Commodities rose to a record, led by energy and grains, on heightened concern that supplies of crude oil, corn and soybeans will trail worldwide demand.

The UBS Bloomberg Constant Maturity Commodity Index rose 2.6 percent to 1,614.67 at 4:59 p.m. in New York after reaching 1,620.04, the highest ever. The Reuters/Jefferies CRB Index gained as much as 2.8 percent to a record 444.46.

Crude oil rose more than $5 a barrel after a U.S. government report showed petroleum inventories declined for a fourth straight week, while China's oil imports jumped in May. Rising rivers left parts of the Midwest facing record flooding, threatening production of corn, the biggest U.S. crop.

"The news on commodity consumption coming out of China this morning, coupled with the crop issues in the Midwest and the U.S. oil-inventory data, was all the market needed to look beyond a mildly weaker economy," Peter Sorrentino, who helps manage $15 billion at Huntington Asset Advisors in Cincinnati, said in an e-mail.

U.S. oil supplies fell 4.56 million barrels to 302.2 million last week, the Energy Department said, three times what was forecast in a Bloomberg News survey. Stockpiles may be strained during the summer driving season.

China's oil imports surged 25 percent to 16.2 million metric tons last month, or about 3.8 million barrels a day, the Beijing- based Customs Administration of China said on its Web site.

Crude-oil futures for July delivery rose $5.07, or 3.9 percent, to $136.38 a barrel on the New York Mercantile Exchange. Oil reached a record $139.12 on June 6. Futures have doubled in the past 12 months.


'Carried by Oil'

"Commodities are largely being carried by oil," said Chip Hanlon, who oversees $1.5 billion in managed and advised assets as president of Delta Global Advisors Inc. in Huntington Beach, California. "There's a speculative fervor in some of these commodities." The Organization of Petroleum Exporting Countries and U.S. commodity regulators have called for reviews of markets and the role of speculators and hedge funds.

Corn soared to a record $7.0325 a bushel as flooding in the Midwest damaged crops. In tandem with corn, soybeans, wheat and cotton jumped the most allowed on U.S. futures exchanges.

Corn production will fall 10 percent to 11.7 billion bushels this year, a bigger drop than forecast a month ago, the U.S. Department of Agriculture said yesterday.

Corn futures for July delivery rose the exchange limit of 30 cents, or 4.5 percent, to the record on the Chicago Board of Trade. The price has soared 78 percent in the past year.

Commodities also rallied as a weaker dollar sparked demand for raw materials as a store of value.


Inflation Hedge

"Inflation will continue to be on people's minds," said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey.

The dollar snapped a two-day rally on speculation the Federal Reserve will keep interest rates steady while the European Central Bank raises borrowing costs to contain inflation.

"Prices are so high, people are beginning to curtail the use of some of these commodities," Hanlon of Delta Global Advisors said. "Commodities have little room to move up on the upside. The demand-side story is going to falter, so it's very much about the currency at this point."

Gold futures for August delivery rose $11.70, or 1.3 percent, to $882.90 an ounce on the Comex division of the Nymex. The metal reached a record $1,033.90 on March 17.