Oil prices edged toward a new two-month high near $57 a barrel today to extend this week's rally as demand in the world's largest consumer showed little signs of succumbing to near record fuel costs.
US crude oil moved up 15 cents at $56.73 a barrel in early trading, taking this week's gains to 6 per cent.
Prices had hit $56.90 yesterday, their highest since early April, when the frontmonth contract reached an all-time peak of $58.28.
Prices rallied as fresh US data showed consumption of transport fuels was still brisk, raising concerns about refiners' ability to meet peak summer gasoline demand while also building enough heating and diesel inventories for later in the year.
"Some sections of the market expected high prices to start having an effect on (US) economic performance, but data coming out recently has shown it's holding up quite well and people have not significantly reduced consumption of oil," said Daniel Hynes, resources analyst at ANZ Institutional Banking.
Demand for gasoline over the past four weeks is up 3 per cent from a year ago, while consumption of distillates - diesel, heating oil and jet fuel - has risen 6.5 per cent, US government data showed this week.
Such sharp growth rates coupled with strong demand from China has put added strain on the world's limited refining capacity, triggering concerns that supplies - particularly of distillates - will be tight during the winter, when demand peaks.