Oil prices struck new highs above $64 a barrel in Asian trading hours because of worries about security in the Middle East and concerns about supplies in the U.S., the world's biggest energy consumer, dealers said.
Continued strong demand in the U.S., which is in the midst of its summer driving season, along with renewed worries about a terrorist attack in Saudi Arabia, are combining to push prices to higher levels, dealers said. "There are fundamental reasons for a strong market," said Tony Nunan, manager for energy risk management at Mitsubishi Corp's international petroleum business in Tokyo.
"There are many geopolitical risks yet, there is no slack in the system to handle any disruptions," he was quoted as saying by Business World.
The U.S. embassy in Riyadh warned on July 20 that terrorists could strike again in Saudi Arabia, which has been rocked by a spate of attacks blamed on Al-Qaida militants in the past two years.
The U.K. said Monday it has credible reports that terrorists are in the final stages of planning attacks in Saudi Arabia.
Saudi Arabia is the world's biggest exporter of oil, producing about 9.5 million barrels per day (bpd), and has the capacity for an additional 1.5 million bpd. It is seen by many analysts as the only oil exporter with significant capacity to spare.
Oil producers body, Opec, has acted to try and cool prices by raising output by 300,000 barrels a day over the last two weeks.
However, analysts said that this was likely to have little impact amid continuing geopolitical worries and feverish demand for oil worldwide, BBC reports.
Analysts estimate that only 1.5 million barrels of spare production capacity remain in the global oil market, leaving the market less flexibility to respond to sudden supply needs.
"We have just got a continuation of an upward trend," said Tom Bentz, an oil analyst with BNP Commodity Futures.
"There is no sign that it will be stopping any time soon."
Photo by Wasington Post.