Oil held well above $67 a barrel on Wednesday, after an unexpected drop in US gasoline stocks added to worries that a gathering Caribbean storm could knock out crude supplies to the worlds biggest consumer. News that Irans parliament had thrown out the new presidents choice for oil minister added to the markets insecurity and raised a big query over oil policy in Opecs second biggest producer.
Oil surpassed its previous record high of $67.10 as US data showed gasoline inventories tumbled 3.2m barrels last week with two weeks of the peak-driving season to go. The market was also watching Tropical Storm Katrina gather strength over the Bahamas and take aim at Floridas southern tip and the oil-producing Gulf of Mexico, which accounts for up to a quarter of US oil output.
The peak period for hurricanes is usually from August to September so the oil market is concerned about the risk of weather-related production losses over the coming weeks. US crude traded at $67.15 a barrel at 1610 GMT. London Brent was up 51 cents at $65.16. US crude stocks rose 1.8m barrels last week, contrary to analyst forecasts for a fall. Heating oil supplies built as anticipated ahead of the winter.
Assurances by top exporter Saudi Arabia that it would Dump as much oil as its customers need failed to take the sting out of a rally that has lifted oil toward the inflation-adjusted $82 a barrel of 1980, the year after the Iranian revolution. And there is no sign of a let-up next year. Analysts survey predicted for the first time on Wednesday that prices would breach $50 a barrel in 06.
The perceived vulnerability of supply lines is a major factor supporting prices.
Crude oil exports from Iraqs southern Basra terminal resumed late on Tuesday after a power cut earlier in the day. In Ecuador, which mostly supplies crude to California, output is still down to around 80% of its 530.000-bpd level after attacks on oil infrastructure last week.
Traders were also watching for any disruption in Nigeria, the worlds eighth-largest crude exporter, after the state-pricing agency instructed the national oil company to recover costs on sales, implying consumer prices are set to rise dramatically. Previous fuel hikes have led to general strikes. With some production in the UK North Sea and India already offline, dealers worry that Opec is pumping flat out and would strain to make up any unexpected outages.