Warnings of a possible terrorist attack in Saudi Arabia and worries over Iran's resumption of its nuclear programme helped push crude prices to nominal records, with analysts saying the price could soon breach $65 a barrel.
US light sweet crude soared past Monday’s record high in early electronic trade on Tuesday hitting a new peak of $64.05 a barrel as an already-tight market reacted to warnings from the US, the UK and Australia of potential attacks in Saudi Arabia, the world's biggest oil producer.
Britain talked of "credible reports" that terrorists were in the "final stages of planning attacks" in the kingdom, a warning that was echoed by the Australian government and came as the US closed its missions in Saudi Arabia, also citing a terrorist threat.
The futures market has been driven higher by one of the worst sequences of refinery stoppages in years. Valero and ConocoPhillips both confirmed on Monday that they had had problems at refineries over the weekend.
Prices were also lifted by Iran's resumption of nuclear activities at a uranium conversion plant in Isfahan - a move that brings Tehran closer to threatened United Nations sanctions.
The International Atomic Energy Agency will hold an emergency meeting of its board of governors on Tuesday to discuss Iran's decision.Oil price: news & analysis
Oil traders fear Iran's resumption of its nuclear programme could prompt the European Union to back US calls for sanctions against the second-biggest oil producer in the Organisation of the Petroleum Exporting Countries.
US oil futures hit a high of $63.99 a barrel and settled in New York up $1.63 at $63.94 a barrel. Brent crude oil, the European benchmark, gained $1.63 at $62.70 a barrel.
The latest refining stoppages heightened concerns that the system has been pushed too far for too long, especially in the US, and cannot keep pace with growing demand for oil products.
George W. Bush, president, on Monday signed a $14.5bn energy bill containing incentives to boost energy production.
Mr Bush said the bill would reduce US dependence on foreign oil, which represents about 60 per cent of US consumption. He has also argued that encouraging domestic output would ultimately push prices lower.
High petrol prices played an important role in developing the political momentum to win approval for the bill in the US Congress. Many energy experts say, however, that small additions to US output are unlikely to have a significant impact on global energy prices.
Meanwhile, a sequence of accidents and lack of spare capacity mean refineries could face difficulties meeting global oil demand this winter. The International Energy Agency, the industrial countries' energy watchdog, has forecast that oil consumption will reach 85.9m barrels a day in the fourth quarter, up from 83.7m b/d today.
"The profusion of recent snags in the US refining system suggests that the system is being pushed beyond its sustainable limits and that interruptions are more likely," said Kevin Norrish, of Barclays Capital in London.
