Crude futures rose to a new high of US$62.69 in Asian trading yesterday as the US government announced the closure of its embassy and consulates in Saudi Arabia because of security threats and on continued concerns that earlier shutdowns of US oil refineries would reduce supply.
Mid-morning in Singapore, light, sweet crude for September delivery on the New York Mercantile Exchange rose as high as US$62.69 in Asian electronic trading before slipping back to US$62.51, up US$0.20 from its close on Friday.
On Friday, crude settled at U$62.31 a barrel, a record close for crude since Nymex trading began in 1983.
That's at least 40 percent higher than a year ago, though crude prices would have to surpass US$90 to reach the inflation-adjusted high set in 1980.
Gasoline edged up slightly to US$1.8415 a gallon while heating oil rose marginally to US$1.7390 a gallon.
The market was on edge as traders closely monitored geopolitical developments in Saudi Arabia following Sunday's announcement of a security threat against US government buildings. A week ago, the death of the country's king also rocked markets, even though most analysts believe there would be little change in the oil policies of Saudi Arabia, the world's biggest petroleum producer.
The planned closure yesterday and today of the US Embassy in Riyadh and consulates in Jiddah and Dhahran was "in response to a threat against US government buildings" in the kingdom, the embassy said, adding it would also limit nonofficial travel of its mission personnel.
In a statement, it urged Americans residing in the world's largest oil-producing and exporting country to keep "a high level of vigilance," but did not elaborate on the nature of the threat.
Hours after the announcement, a Saudi Interior Ministry spokesman, Major General Mansour al-Turki, said his government had no information about a possible threat.
Over the past few years, rising oil consumption has strained the world's limited excess production capacity, putting energy traders on edge about any threat to supply.
Meanwhile, analysts said positive US economic figures on Friday showing payrolls expanded by 207,000 in July, the highest reading in five months, continued to boost bullish sentiment in the market.
"The US economy looks healthy and it's safe to infer that the demand for oil and diesel will remain pretty firm and that the price of oil should be helped along as well," said commodities strategist David Thurtell of Commonwealth Bank of Australia in Sydney.
Oil prices rose even though the Organization of Producing and Exporting Countries said late Friday that it increased oil production by 300,000 barrels a day in the last two weeks, to around 30.4 million barrels daily.
The increase was an attempt to cool surging oil prices, OPEC's president Sheik Ahmed Fahd Al Ahmed Al Sabah said, but the market appeared to have largely disregarded the Kuwaiti Prime Minister's remarks, as refinery concerns continued to weigh on traders' minds in a time of supply tightness.
At least seven US refineries have reported problems of one kind or another in the last two weeks, ranging from fires at Chevron Corp's El Segundo, California, plant, and BP PLC's Texas City refinery to the complete shutdown of Exxon Mobil's plant in Joliet, Illinois.
Traders feared overworked US refiners may not quickly recover from shutdowns to meet demand for gasoline and other products.
Ken Hasegawa of Tokyo-based brokerage firm Himawari CX said the buying momentum propelled by refinery woes was "strong enough to push September Nymex crude to as high as US$62.80 a barrel."
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