Oil prices hit a new record above $60 a barrel today on demand growth resilience in the face of high fuel costs and worries about oil policy under Iran's new hardline president.
US August crude traded as high as $60.64 a barrel and by midday was up 55 cents at $60.39. US crude is above $60 for every month until August 2006 with December 2005 setting a peak $61.90 a barrel.
London Brent set a record $59.21 a barrel before easing to $58.91, up 55 cents.
“The market is testing higher to see what price levels this demand can endure,” said Naohiro Niimura, vice president at the derivative products division of Mizuho Corporate Bank.
Prices have risen as investors bet refiners and producers will struggle to meet winter demand in the fourth quarter.
Although high prices are eroding some strength from the world economy, the overall growth picture remains solid, central bankers meeting in Switzerland said at the weekend.
That economic resilience has encouraged speculators to test consumers' ability to absorb higher costs, with only a significant pull-back in demand from an economic slowdown seen likely to tame prices.
Victory in Iran's presidential election for ultra-conservative Mahmoud Ahmadinejad also helped support prices.
Mr Ahmadinejad has vowed to flush out corruption from the country's oil sector and favour domestic investors, although analysts do not expect a big shift in production policy.
Held back by US sanctions, Iran has struggled to lift output capacity with foreign investment still severely restricted.
Dealers see overall tight market conditions running for at least another year, especially for distillate products such as heating oil and diesel.
Over the past four weeks, demand for distillates in the United States has risen nearly 7 per cent from last year, while gasoline consumption is up 2.5 per cent.
The growth in distillate usage reflects strong consumption in the industrial and transport sectors, particularly in the trucking business used to ferry goods around the United States.
Dealers were undeterred by Opec's largely symbolic output rise earlier this month. Now producers are consulting on another modest increase of 500,000 barrels a day, cartel president Sheikh Ahmad al-Fahd al-Sabah said on Saturday.
Saudi Arabia, the only Opec producer with any spare capacity, says it is already meeting customer demand for crude.