NEW YORK - Oil prices rose briefly to $66 a barrel yesterday and settled at a new high amid strong demand and concerns about supplies.
With U.S. gasoline inventory levels falling, "gasoline will remain a key concern over the coming weeks," said Orrin Middleton, energy analyst at Barclays Capital in London.
The U.S. Department of Energy's inventories report Wednesday showed a decline in gasoline stocks, triggering heightened concerns about potential output disruptions at a time of strong demand.
A report yesterday from the International Energy Agency, which forecast slower global oil demand growth this year, failed to cool the market. The Paris-based agency said in its monthly report that oil demand this year will be 150,000 barrels a day less then it expected, as China's oil demand continues to show signs of weakening.
Nevertheless, world oil demand will grow this year by 1.6 million barrels a day to 83.7 million barrels a day, the IEA said.
After climbing as high as $66 a barrel, light sweet crude for September delivery settled 90 cents higher at $65.80 a barrel, the highest price since trading began on the New York Mercantile Exchange in 1983.
Gasoline futures surged more than 5.35 cents to $1.9498 a gallon, and heating oil climbed 5.97 cents to $1.8985 a gallon. Brent crude for September delivery gained 40 cents to $64.39 on London's International Petroleum Exchange.
The IEA also warned that despite a rapid build in oil inventories during the first half of this year, more supply is needed.
"Stocks have built rapidly in the first half of 2005, despite $60 oil, but clearly, the market verdict remains more inventories are needed until investment responses catch up and demand patterns are clearer," the agency said.
Crude futures have risen 16 percent in the last three weeks, driven by an array of concerns about supply disruptions: U.S. and Venezuelan refinery outages; the Atlantic hurricane season's impact on production in the Gulf of Mexico; the death of Saudi Arabia's King Fahd; and tensions over Iran's nuclear program.
"Hedge funds continue to roll over their large energy investments from September to October, and many are predicting prices of $65 to $70 per barrel as they take more length," Energyintel analyst George Orwel said in a research note.
While oil prices are almost 50 percent higher than a year ago, they would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980.
The Energy Department's weekly U.S. petroleum supply snapshot on Wednesday showed a drop in gasoline stocks by 2.1 million barrels to 203.1 million barrels.
Energy markets have been extremely jumpy about the refinery outages. Some traders said the troubles - the latest reported at BP PLC's plant in Texas City, Texas, on Wednesday - is evidence that the industry and its aging infrastructure are having difficulty maintaining output at high levels.
But analysts and industry officials said refinery snags are not out of the ordinary for this time of year, when plants run hard to meet peak gasoline demand.