Fears that U.S. refineries will be unable to cope with increasing demand in the second half of the year sent crude markets roaring Monday, with prices hitting a new intraday high near USS$60 a barrel.
The kidnapping last week of six oil workers, including two Germans, in OPEC-member Nigeria also contributed to the momentum.
"We have been expecting prices to come down for a while but this is clearly not the case. The rally is definitely sustained by gasoline demand in the United States posting a 3 percent yearly growth, which is seen as extremely strong," said Deborah White, energy analyst with Barclays Capital in Paris.
"People are trying to push prices through US$60," she added.
Light sweet crude for July delivery gained 23 cents to US$58.70 by midmorning in Europe in electronic trading on the New York Mercantile Exchange. Earlier, crude oil futures hit a record intraday high of US$59.23 a barrel.
Heating oil rose a cent and a half to US$1.6688 a gallon (3.8 liters), while unleaded gasoline futures were up half a cent to US$1.6525 a gallon.
Brent for August delivery broke the US$57.65 per barrel peak it reached last April to set a new high at $58.58 Monday on London's International Petroleum Exchange. It later fell back a bit to US$58.23 a barrel, up 47 cents.
Oil workers in Norway, the world's third-largest exporter, could begin a strike as soon as early Wednesday in a salary dispute that could cut a third from the country's daily output of 3 million barrels.
On Friday, crude climbed as high as US$58.60 per barrel before settling at US$58.47, an increase of US$1.89 on the New York Mercantile Exchange. That topped the exchange's previous intraday high of $58.28 set on April 4.
While Nymex oil futures are more than 50 percent higher than a year ago, they are still well below the inflation-adjusted high above US$90 a barrel set in 1980.
"Bulls believe the only thing that can cool the market is an erosion in demand, but so far there are no signs of this," said Energyintel analyst Matt Piotrowski. "They also focus on OPEC's recent meeting as reinforcing the belief that the organization cannot cool prices."
The Organization of Petroleum Exporting Countries failed to soothe the market last week when it agreed to raise its daily output quota to 28 million barrels a day because its members had already been unofficially exceeding that level.
Including Iraq, which is not bound by the 11-member cartel's quota system, OPEC is pumping close to 30 million barrels a day, or about 35 percent of global demand.
Analysts said unlike the record prices last year, which were driven largely by concern over geopolitical events in oil-producing countries such as Nigeria, Saudi Arabia, Iraq and Venezuela, this year's trend has more to do with speculative buying, continued supply fears and limited excess production capacity.
"This year we've had a confluence of factors driving up this rally: first, more hedge funds are allocating money to the red-hot oil markets; second, demand is outstripping supply; and third, capacity is tight in refineries and OPEC production facilities," said Victor Shum, energy analyst at Texas-based Purvin & Getz.
"The oil market is prone to price spikes because of capacity tightness, and this attracts the speculators, who tend to buy on momentum," Shum said.
Analysts also said demand for distillates in the summer - gasoline for vacationing Americans and diesel for generators of small businesses in China when power shortages occur - keep the market on edge.
"We saw last week's expectation being built that U.S. refineries would struggle to meet the demand of the driving season. This is likely to provide support for the coming week," said ANZ Bank energy analyst Daniel Hynes in Melbourne, Australia.
Hynes also said crude's rise was partly a reaction to the kidnapping of two German and four Nigerian Shell subcontractors who had been seized by gunmen on Wednesday. They were released Saturday. Nigeria exports some 2.5 million barrels of oil daily, making it the world's seventh-leading exporter and the fifth-biggest source of U.S. oil imports.
EDITH BALAZS, Associated Press Writer
The Russian Defence Ministry acknowledged that the Americans treat Russian military men in Syria with respect. The Americans always warn Russia accordingly, but not Israel
After the incident with the shootdown of the Ilyushin Il-20 reconnaissance aircraft over the Mediterranean Sea, Russia will supply an S-300 anti-aircraft missile system to Syria
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