Oil prices firmed on Tuesday to within striking distance of the record as fears over the stability of world supplies persisted following the death of Saudi Arabia's King Fahd. A spate of refinery problems in the United States and expectations a US government report Wednesday would show a fifth consecutive weekly draw in crude oil supplies also supported the market, dealers said.
"There's no sign that the key US summer trends are changing: crude oil fundamentals keep tightening," said Jan Stuart, analyst at Fimat USA.
US light sweet crude for September delivery rose 32 cents to $61.89 barrel, within 50 cents of the peak of $62.30 scaled a day earlier. London Brent crude rose 18 cents to $60.62 a barrel after also jumping to a record high of $60.98 on Monday.
King Fahd's death on Monday sparked the latest surge to new peaks, even though his successor Crown Prince Abdullah is not expected to change oil or foreign policies, and has been de facto ruler of the world's largest oil exporter since Fahd suffered a stroke in 1995.
Still, there were fears Fahd's death might stir uncertainty as the new king is more than 80 years old, opening the way for a succession struggle between conservatives and reformers.
Fahd's death "was a catalyst for some people to look more closely at the family than perhaps they did and they realised the new king is 83," said Mark Keenan of MPC Commodity Fund in London.
Refinery problems in the US Gulf Coast were also lifting the energy markets by rekindling worries about high summer demand for gasoline despite record prices and the adequacy of heating fuel stockpiles ahead of the looming winter.
Motiva Enterprises LLC, a joint venture between Royal Dutch/Shell and Saudi Aramco, shut a crude unit at its Norco, Louisiana, refinery for repairs, according to sources, adding to a list of other unplanned refinery outages in recent days.
US inventory data to be released on Wednesday by the Energy Information Administration was expected to show the fifth consecutive weekly decline in crude oil stockpiles, further eating into a big year-on-year surplus.
Analysts forecast a 1.6 million barrel fall in crude inventories, a 1.9 million barrel increase in distillate stocks and a 900,000 barrel fall in gasoline stockpiles.
Traders said the decrease in crude stocks was unlikely to worry the markets unduly, given that supplies of crude have been swollen by the highest Opec output for a quarter of a century, and a distillate build could further ease worries over high fourth-quarter demand.
Traders remained wary about possible supply disruptions due to hurricanes, after the busiest start to the Atlantic hurricane season on record cut more than 6 million barrels of US offshore production and briefly shut down Mexico's oil industry.
On Tuesday, the US government said the 2005 season would be worse than expected, with as many as 21 named storms - matching a record set in 1933.
While oil prices zip along at record levels in nominal terms, they remain far below inflation-adjusted peaks near $90 in the early 1980s and the record of nearly $100 set in the 19th-century.
According to figures from BP, the all-time inflation-adjusted record oil price was $97.79 for US crude. It was hit in 1864 when the Pennsylvania oil boom drove prices to $8.06 in the money of the day.
Worries over US policy toward Iran also provided some long-term support for oil after Tehran, in defiance of EU warnings, said on Monday it had begun preparations to resume nuclear work that the West suspected could help it build an atom bomb.
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