Oil prices hit a new record on Tuesday, extending gains the previous day that followed news BP was halting production at the biggest oilfield in the United States, possibly for months.
London Brent crude rose 35 cents to a new all-time high of US$78.65, the ICE futures exchange said, a
cent higher than Monday's mid-session peak of US$78.64. By 1622 GMT, it had fallen back to US$77.99, 31 cents down on the day.
European markets have been pulled higher on expectations the United States will draw in more oil imports to make up for the closure of the Prudhoe Bay field in Alaska that pumps 8 per cent of US domestic output.
US crude futures CLc1 were 43 cents lower at US$76.55 a barrel following a three per cent rally on Monday.
BP on Sunday began shutting down its 400,000 barrel per day (bpd) Prudhoe Bay oilfield after discovering a corroded pipeline and said it could be weeks or months before production resumed.
The outage added to traders' concerns about the adequacy of supply in view of violence in the Middle East and prolonged production outages in Nigeria.
It has underlined the vulnerability of the world's ageing oil infrastructure, much of which dates back around 30 years.
"There's the Iranian nuclear situation, Israeli action in Lebanon and now we've got rusting infrastructure," said analyst David Dugdale of MFC Global Investment Management.
"It's very hard to be bearish at the moment.... I think prices are going to stay high and volatile."
Other analysts agreed.
"There is more pressure on the upside than the downside," said Angus McPhail of UK-based Alliance Trust. "The geopolitical situation is unlikely to improve, but there is a possibility it could worsen."
TWENTY-FIVE PER CENT RALLY
US oil prices have risen by more than 25 per cent since the start of the year, driven upwards by the shut in of at least 718,000 barrels per day of Nigerian crude, mostly because of militant unrest, as well as the situation in the Middle East.
The West's dispute with oil producer Iran over its nuclear programme has raised concern of possible disruption of Iranian supplies and that has been compounded by anxiety that a four-week old conflict between Israel and Lebanon could spread.
Days of intensive efforts at the UN Security Council to bring about a ceasefire and lasting peace have not born fruit and Israel has vowed to expand its military offensive against Hizbollah guerrillas unless a diplomatic solution emerges soon.
Iran funded and armed Hizbollah in the 1980s, but says its support now is only moral and political.
For all the fears of supply disruption, inventory levels for now are above those of a year ago.
The next set of US government stock data, to be released on Wednesday, however, is expected to show a 1.2 million fall in crude stocks and 1.2 million barrel draw in petrol inventories, according to a Reuters poll of analysts.
Another anxiety for the market is that the US hurricane season, which continues until around November, could disrupt oil and gas production in the US Gulf of Mexico.
Hurricanes last year temporarily knocked out a quarter of US crude and fuel production and sent prices to what were then record highs.
- REUTERS
Oil prices hit a new record on Tuesday, extending gains the previous day that followed news BP was halting production at the biggest oilfield in the United States, possibly for months.
London Brent crude rose 35 cents to a new all-time high of US$78.65, the ICE futures exchange said, a
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