Oil prices hit an all-time record on Friday fuelled by global economic growth and enduring worries that gasoline supplies will struggle to meet peak summer demand in the United States.
US light crude jumped to a record $41.17 a barrel, its highest in the 21 years since the New York Mercantile Exchange launched the contract in 1983. It had eased to $40.95. London Brent stood at $38.21, down 28 cents, after scaling to a 13-year peak at $38.53 a barrel on Thursday.
Allowing for inflation, prices are about half those during the oil price shock that followed the 1979 Iranian revolution. Adjusted for inflation at 2002 prices, crude's historic peak was a $78-a-barrel average in 1980, according to BP.
"If you look at the way this market is rallying, it's been broad-based and gradual, relentlessly going higher supported by a strong products market and solid refining margins," said Dennis Kongsiri, vice president at Mitsui & Co Energy Risk Management in Sydney.
"At this point the market is worried that the cushion from Opec is very small. With Opec having 2.5 million barrels (per day) of spare capacity, it does not leave much room for things to go wrong in the world."
Dealers said crude's rally was led by a rise in US gasoline futures to a record $1.4015 a gallon after government data showed stocks shrinking at a time when refiners try to build inventories ahead of rising summer demand.
The Memorial Day holiday weekend at the end of May marks the traditional start to the so-called summer driving season in the United States, when motorists take to the roads for vacation.
Strong global economic growth is causing oil demand to increase faster than expected while upheaval in the oil-rich Middle East and doubts about whether the Opec cartel can cool off the sizzling market have helped support prices.
According to US officials, the oil spike does not appear to have stunted that growth. Gregory Manikin, chairman of the White House Council of Economic Advisors, told Reuters the US economy remained on track for a robust recovery and current oil prices did not pose a significant risk.
"As long as the world economy does not go into recession, it could be the case that the days of cheap oil are over," Kongsiri said.
Saudi Arabia's attempt to cool prices by proposing an increase in Opec supply quotas has yet to have any impact. Riyadh has already signed off on more supplies to European customers and US in June.
The Organisation of the Petroleum Exporting Countries will decide output policy on June 3 in Beirut after discussing options on the sidelines of a forum for petroleum producer and consumer countries in Amsterdam on May 22-24.
Already pumping more than two million barrels a day in excess of its official limits, traders say Opec's proposed increase in quotas of at least 1.5 million bpd will do little more than legitimise existing production.
Spare capacity in Opec is limited largely to Saudi Arabia, with some spare volume available in the United Arab Emirates and Kuwait, analysts say, noting those three producers will need to open the taps to add real extra supplies.
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